* Bond dispute centers on $400 million payment
* Bank of New York modifies position
By Bernard Vaughan
NEW YORK, April 1 Bank of New York Mellon Corp
will depose newly departed Chesapeake Energy Corp
Chief Executive Aubrey McClendon in its dispute with the energy
company over a bond redemption, lawyers for both companies said
at a hearing in federal court on Monday.
Chesapeake last month sued Bank of New York Mellon, the bond
trustee for a $1.3 billion debt issue, seeking to block the bank
from interfering with Chesapeake's proposal to redeem the debt
at face value.
Bank of New York Mellon believes Chesapeake would have to
pay noteholders a $400 million make-whole payment because
Chesapeake is trying to redeem the notes after a March 15
The bank believes that McClendon "clearly has knowledge" of
Chesapeake's rationale for redeeming the bonds early, Benjamin
Nagin, a lawyer for the bank, said at the hearing in federal
court in Manhattan.
McClendon's departure from Chesapeake, which became
effective on Monday, is unrelated to the bond dispute. His
departure was announced in January after heavy spending on oil
and gas properties caused a liquidity crunch and the price of
natural gas collapsed. The U.S. Securities and Exchange
Commission is also investigating a stake in company wells the
company granted McClendon.
On Friday, Chesapeake appointed its chief operating officer,
Steven Dixon, as interim chief executive. Dixon will also serve
on a panel to find McClendon's replacement.
U.S. District Judge Paul Engelmayer, who is overseeing the
bond dispute, on Monday expressed skepticism on McClendon's
relevance to the case, given that the trial is due to start
A lawyer for Chesapeake, Richard Ziegler, said at the
hearing, "We're going to produce him," referring to McClendon.
It is unclear when McClendon would be deposed. A spokesman
for Chesapeake did not immediately comment.
At the hearing, Steven Bierman, another lawyer for the bank,
also modified the bank's position on the early redemption
He said that if Engelmayer finds that the notice was
untimely, the bank will not argue that it should trigger the
make-whole payment, but would instead simply view the notice as
"We think that's a very positive development," said Ziegler,
Chesapeake's lawyer, at the hearing.
Chesapeake believes it only had to notify investors of its
plans to redeem the notes by March 15, while Bank of New York
argues that the redemption had to take place by that date.
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.