Chesapeake Energy Corp hiked scheduled loan amount increasing pressure on the company to expedite asset sales. The natural gas producer has annoyed shareholders by recent revelations regarding potential conflicts of interest of its chief executive.
On Tuesday Shares of Chesapeake dropped 5.6 percent as Standard & Poor’s announced to reduce its credit rating for the company from “BB,” to ‘BB-’.
Jefferies Group and Goldman Sachs have offered loan up to $12 billion to the country’s second biggest gas producer after Exxon Mobil. Chesapeake Energy Corp is facing a shortfall of $10 billion due to lowest natural gas prices in a decade. Chesapeake desperately needs money. The company replaced existing debt of $4 billion with new debt of $4 billion at an exorbitant interest rate of 8.5 percent which will increase to over 11 percent in case the company fails to pay it off by the year end.
The natural gas producer revealed that after syndication as well as fees expenses, it got $3.8 billion, which brought its liquidity to more than $4.7 billion in borrowing and cash capacity. Even after getting the new loan, Chesapeake Energy Corp is faced with increasing pressure to slash costs that might be in the form layoffs. The company has 12,600 employees on its pay roll.
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