It appears that Chesapeake Energy is having trouble convincing its noteholders with notes due in 2017/2018 to exchange those notes (IOUs), which are unsecured (no guarantees they get paid if the company goes belly up) for new secured, second-lien notes due in 2022. We told you two weeks ago that Chesapeake had embarked on a program to swap out various classes of notes, a plan to delay repaying outstanding debt (see Chesapeake Energy Floats Plan to Exchange $1.5B Worth of IOUs). Somewhere between 10%-28% of the outstanding $1.7 billion in 2017/2018 notes–those notes closest to maturity–have signed on to the plan. It’s not enough. Chesapeake has a gun to the head of its noteholders, a “prisoners’ dilemma.” If a significant number don’t go for the plan, it’s a near-certainty the company will be forced to file for bankruptcy according to finance experts, and those noteholders will get nothing because their notes are unsecured. If noteholders do go for the plan, they get less than what they signed on for, but at least they get something, and the something they get is far more assured, even if the company files for bankruptcy. If the note exchange does happen, Chesapeake is still not out of the bankruptcy woods by a long shot, and that has all of its investors, who hold debt (notes and bonds) or equity (stocks), worried…
