Midstream US oil and gas producer Chesapeake Energy’s Chapter 11 bankruptcy plan has been approved by a US judge, giving lenders control of the firm and ending a contentious trial.
Chesapeake will emerge from bankruptcy with about $3 billion in new financing, a $7 billion reduction in debt, and $1.7 billion cut from gas processing and pipeline costs.
Investors who committed to back the restructuring last spring (as energy tumbled) stand to benefit enormously. A rebound in energy prices raised Chesapeake’s value to about $5.13 billion, the judge hearing the case said.
Once the second-largest US natural gas producer, Chesapeake filed for court protection last June, reeling from overspending on assets, combined with a sudden decline in demand and prices, spurred by the coronavirus pandemic.
Creditors who opposed the plan claimed Chesapeake was bankrupt long before it sought court protection and harshly criticized terms that gave backers (including mutual fund giant Franklin Advisers Inc) heady returns.
The plan will allow Chesapeake to emerge “a stronger and more competitive enterprise,” spokesman Gordon Pennoyer said.
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