Chesapeake sues BNY Mellon over $1.3 bn bonds redemption

Northern, WI 03/10/2013 (avauncer) –Chesapeake Energy Corp. (NYSE:CHK), the second largest oil and gas company in the US, has sued trustee Bank of New York Mellon Corp. (NYSE:BK), a leading investment management firm, in the federal court of Manhattan over redemption of more than $1.3 billion in notes and avoidance of interest.

Chesapeake has said in a statement that it will seek a confirmation from the court on the notice issued on or before March 15 regarding the timely redemption at par.

The Oklahoma-based firm said that BNY Mellon was under the wrong impression that the deadline to issue notice had already passed. It also said that there should be a future interest provision on the notes, which is due in 2019.

Chesapeake’s $1.3 billion notes touched a record high in a bet that the company has exceeded the time limit to repurchase the debt at par, or 100 cents, as permitted by the debt terms, said Adam Cohen, the founder of independent research firm Covenant Review.

The debt was trading at 105.3 cents around 3:57 pm, New York, to give 5.73 percent, said Trace, Trade and bond-price reporting.

Some traders are of the view that Chesapeake is far away from the reality as the notes can not be redeemed at par and the company needs to pay a substantial premium if going for repurchasing, Cohen further said.

BNY Mellon Amy Shipper, however, declined to give any comment immediately on the lawsuit.

Chesapeake Energy Corp. (NYSE:CHK) shares climbed 2.3% trading at $21.23