Chesapeake Energy Corporation (NYSE: CHK), a natural gas and oil exploration and production company, late Friday, announced that it entered into a $3 billion unsecured loan from Goldman Sachs Bank USA and affiliates of Jefferies Group Inc. The announcement has sent CHK shares sharply higher in trading today.
Chesapeake Energy shares are rebounding after falling sharply last week. At last check, CHK shares were trading 5.17% higher at $15.57 on above average volume of 62.65 million.
Chesapeake Energy said that the net proceeds of the loan will be used to repay borrowings under the company’s current corporate revolving credit facility.
Aubrey K. McClendon, CEO of Chesapeake Energy, said that the short-term loan from Goldman and Jefferies provides CHK with significant additional financial flexibility as the company executes its asset sales during the remainder of 2012.
In a conference call, McClendon said that the company is confident it would complete asset sales to plug funding gap.
Chesapeake has been under pressure in last few weeks due to corporate governance issue after Reuters reported that CEO McClendon had mortgaged his personal stakes in the company’s oil and gas wells to companies that lent money to CHK.
According to analysts, the $3 billion loan may ease the pressure on Chesapeake in the short-term. However, analysts noted that the funding comes at a high cost for the company.
Meanwhile, the Wall Street Journal reported that billionaire investor Carl Icahn would take a stake in the company. However, Chesapeake did not confirm whether Icahn is taking a stake in the company. McClendon said that he has seen the WSJ report and would not be surprised if Icahn became a large shareholder.
The new loan and assurance from McClendon regarding the asset sale has given investors some confidence. It will be interesting to see if investors remain confident in the coming weeks.
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