| NEW YORK, March 19
NEW YORK, March 19 A federal judge on Tuesday
set a tentative trial date of April 23 for Chesapeake Energy
Corp's dispute with investors and a bond trustee over
its plan to redeem $1.3 billion in notes early.
U.S. District Judge Paul Engelmayer also said he would not
be bound by a ruling he issued last week, in which he suggested
noteholders who oppose the plan on the grounds that Chesapeake
missed a critical deadline had a slightly better argument.
"That was really a preliminary reaction" based on the
evidence he'd seen by that time, Engelmayer said Tuesday.
The natural gas company filed a lawsuit earlier this month
in U.S. District Court in Manhattan seeking to block bond
trustee Bank of New York Mellon Corp from interfering with the
proposed redemption of the debt at 100 cents on the dollar, or
Chesapeake believed it had until March 15 to notify
noteholders of its intention to redeem the notes, which have a
principal amount of $1.3 billion, an interest rate of 6.775
percent, and are due in 2019.
But investors who own roughly $250 million of the notes
argue the company had to redeem the notes by March 15. The
company owes them an additional $400 million make-whole payment
for any redemption that occurs after March 15, they argue.
Bank of New York Mellon also opposed Chesapeake's view of
the March 15 deadline.
Any other noteholders who oppose Chesapeake's plan to redeem
the notes at the more favorable rate must present themselves by
Friday, Engelmayer, who will rule on the trial without a jury,
said at the hearing Tuesday.
Last Thursday, Engelmayer denied Chesapeake a court order
allowing it to redeem the notes early at the more favorable
price. But he also made it clear that Chesapeake would likely
not be subject to the make-whole payment if it issued the
redemption notice and he later ruled it did so too late.
Encouraged by that aspect of Engelmayer's ruling, Chesapeake
on Friday announced that it would try to redeem $1.3 billion of
notes at par. Chesapeake has said it wants to redeem the notes
early as part of a broader plan to refinance debt.
The dispute is separate from a U.S. Securities and Exchange
Commission probe over a perk that granted Chesapeake's departing
chief executive, Aubrey McClendon, a stake in company wells.
In addition, the U.S. Department of Justice is examining
possible antitrust violations over Chesapeake land transactions
As they prepare for trial, attorneys for the noteholders are
interested in reviewing materials Chesapeake used to market the
notes and communications it had with ratings agencies, said
Benjamin Nagin, one of the attorneys.
In Tuesday trading, the 6.775 percent notes fell 0.2 cents
on the dollar to 104.3 cents, boosting their yield to 5.91
percent from 5.87 percent, according to bond pricing service
Trace. The price had reached as high as 108 cents last week
after Chesapeake lost its bid for a preliminary injunction.
Shares of Chesapeake closed Tuesday down $1.13, or 5.1
percent, at $21.04 on the New York Stock Exchange.
A representative for Chesapeake was not immediately
available for comment.
The case is Chesapeake Energy Corp. v. Bank of New York
Mellon Trust Co NA, U.S. District Court, Southern District of
New York, No. 13-01582.