(Reuters) - Chesapeake Energy Corp (CHK.N) said Thursday it is working with banks to issue $2 billion in debt to pay off more-expensive loans on its bloated balance sheet.
The company said it is setting up a five-year term loan facility, and would use proceeds to pay off a loan it obtained in May of this year, as well as other debt.
It Is not clear yet what the interest rate would be for the new loan, as it has not been priced yet, but executives want to repay several expensive loans with rates all above 6 percent.
Chesapeake said last month that it planned to pay off most of a pricey $4 billion bridge loan after receiving $2.8 billion in cash from the sale of some of its oil and natural gas properties in the Permian Basin. It said then that it would pay down the loan to $1.2 billion with plans to repay the full balance by the end of the year.
The loan, made in May, was a lifeline at the time for the U.S. energy company that was staring at a funding shortfall of about $10 billion. So far this year, Chesapeake has sold about $12 billion of its assets, a situation that has alleviated its liquidity crunch.
Chesapeake’s investment bankers on the Permian deal, Goldman Sachs and Jefferies Group, provided the loan.
In May, Chesapeake replaced $4 billion in existing debt with the new $4 billion, which came at a steep 8.5 percent interest rate and would rise to more than 11 percent if the company did not pay it off by the end of the year.
The company is set to post quarterly earnings after the close of the stock market on Thursday.
Earlier this year a series of Reuters investigations raised questions about potential conflicts of interest on the part of Chief Executive Aubrey McClendon and alleged collusion over land prices.
Shares of Chesapeake rose 0.4 percent to $20.35 in premarket trading on Thursday. The stock is down more than 9 percent so far this year. (Reporting By Ernest Scheyder and Michael Erman; Editing by Gerald E. McCormick)