Exclusive: Chesapeake Energy is preparing a potential bankruptcy filing as it grapples with an unprecedented rout in energy prices
), the oil and gas exploration and production company that was at the forefront of the past decade’s U.S. shale boom, is preparing a potential bankruptcy filing as it grapples with an unprecedented rout in energy prices, people familiar with the matter said on Wednesday.
Such loans, referred to as debtor-in-possession financing, are key to companies seeking Chapter 11 bankruptcy protection because they help them sustain as much of their business as possible during court proceedings. Chesapeake is considering skipping a payment of $192 million due in August, adding urgency to the discussions with creditors, one of the sources said. Chesapeake also faces a $136 million obligation on July 1.
Earlier this month, Moody’s cut Chesapeake’s credit rating deep into junk territory, which makes it exceedingly expensive to borrow because of the high risk of defaulting on debt. The ratings move reflected plunging energy prices along with the company’s eroding liquidity and “very limited access to capital,” Moody’s said. Moody’s predicted a “high likelihood of a restructuring in the near term.
Under McClendon’s stewardship, Chesapeake spent $43 billion over 15 years snapping up land parcels across the United States, helping pioneer the relentless extraction of untapped oil and natural gas from shale rock formations, an environmentally controversial method that became known as fracking.
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