Reuters: Mergers News: Chesapeake must sell $7 billion in assets-Moody's

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Chesapeake must sell $7 billion in assets-Moody's May 31st 2012, 21:12 HOUSTON | Thu May 31, 2012 5:12pm EDT HOUSTON May 31 (Reuters) - Chesapeake Energy Corp, the U.S. oil and gas company facing a funding shortfall this year and next, must sell at least $7 billion in assets to avoid breaching a loan covenant, analysts at Moody's Investors Service said on Thursday. Decade-low natural gas prices and hefty spending have left Chesapeake to fill a shortfall that Moody's estimates at nearly $6 billion in 2013. The company is also facing corporate governance issues and some of its largest investors are calling for major changes. "Even $7 billion in asset sales could place Chesapeake's covenant compliance for its revolving credit facility in some doubt and the company would still face a significant funding gap in 2013," Moody's said in a note. The company would "gain far more covenant headroom" with the sale of an additional $10 billion in asset sales this year, the analysts said. Any sales total below $7 billion will likely lead to a credit rating downgrade from its current Ba2 rating, Moody's said. Earlier this month, Chesapeake secured a high-interest $4 billion term loan from its investment bankers, an amount that is expected to be repaid with the proceeds from planned asset sales of up to $11.5 billion. So far, Chesapeake has put its 1.5 million acres in the Permian Basin up for sale along with a half a million acres in Colorado and Wyoming. The company is also searching for a joint venture partner in the Mississippi Lime basin. This year, Chesapeake's cash flow shortfall is expected to be more than $10 billion, according to Moody's. Link this Share this Digg this Email Reprints

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