Chesapeake Energy Announces Amendment To Credit Facility, Shares Surge 15%

Shares of Chesapeake Energy Corporation CHK surged by more than 15 percent on Monday after the company announced an amendment to its $4 billion secured revolving credit facility agreement which matures in 2017.

Chesapeake Energy stated its senior secured revolving credit facility borrowing base was reaffirmed at $4 billion. The company added that its next scheduled borrowing base redetermination has been postponed and its lenders have agreed not to exercise their interim redetermination right until June 2017.

Chesapeake Energy said it has agreed to list additional assets as collateral, which could limit its borrowing capacity if its collateral coverage ratio falls below 1.25x.

The company noted that its amendment provides "temporary covenant relief" as it reduces the interest coverage ratio to 0.65x from 1.1x through March 2017, after which it will rise to 0.70x through June 2017. Following that, the ratio will revert to 1.2x in September 2017 and 1.25x thereafter.

Chesapeake Energy also pledged to maintain a minimum liquidity amount of $500 million, or $750 million if its collateral coverage ratio falls below 1.1x.

Finally, the amendment also gives Chesapeake the ability to incur up to $2.5 billion of first lien indebtedness secured on a pari passu basis with the existing obligations.