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Bank of NY Mellon appeals ruling on Chesapeake bond lawsuit
May 13, 2013 / 7:27 AM / in 4 years

Bank of NY Mellon appeals ruling on Chesapeake bond lawsuit

May 13 (Reuters) - Bank of New York Mellon Corp is appealing against a district court judgment that allowed Chesapeake Energy Corp to redeem $1.3 billion of notes six years before their maturity date, a court filing showed.

Last week, U.S. District Judge Paul Engelmayer in Manhattan ruled that Chesapeake’s March 15 notice to redeem the 6.775 percent notes, which would have matured in 2019, did not come too late.

He rejected the contention by Bank of New York Mellon that Chesapeake had missed a deadline a month earlier. The redemption price for the notes was 100 cents on the dollar plus interest.

The dispute flared when Chesapeake, hoping to take advantage of lower interest rates, decided to call the bonds six years earlier than the maturity date to avoid millions of dollars in extra payments.

Bank of New York Mellon, trustee of the notes, opposed the redemption, saying the No. 2 U.S. natural gas company waited too long to tell investors of its plans.

Chesapeake complained that Bank of New York Mellon failed to distinguish between a deadline for when notice must be given and when the redemption date occurs.

After last week’s court victory, Chesapeake said it intends to refinance the notes and that decision by Judge Engelmayer will save it more than $100 million in interest payments.

A notice of Bank of New York Mellon’s appeal was filed on May 11. The appeal will be heard by the U.S. Court of Appeals for the Second Circuit, according to a filing.

The case is Chesapeake Energy Corp v. Bank of New York Mellon Trust Co, U.S. District Court, Southern District of New York, No. 13-01582.

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