Updates
Later, 9:30 p.m.: Chesapeake gets $3 billion loan; relatively high interest rate at 8.5%
"I would imagine that this is a relatively expensive source of financing for Chesapeake to feel compelled to pursue," ...[spokesman]
Wall Street has long benefited from Chesapeake's financing moves. Prior to the new deal, the Oklahoma City-based company had paid nearly $1 billion in investment banking fees since 2000...
Earlier on Friday, Chesapeake said it could delay asset sales in order to preserve cash flow needed to comply with requirements of its existing $4 billion corporate credit facility.
Original Post
Embattled Chesapeake Energy Corp. has saddled itself with about $1.4 billion of previously unreported liabilities over the next decade through off-balance-sheet financial deals.
Most of these costs will hit this year and next, at a time when the company needs to raise substantial cash to cover operating expenses and its move into the more lucrative oil business.
Chesapeake, the second-largest natural-gas producer in the U.S., has made a number of long-term commitments to Wall Street banks that require it to deliver specific amounts of oil and natural gas each month through 2022, in exchange for upfront cash. Those deals, known as volumetric production payments, or VPPs, are essentially debts, with payments made in fuel rather than cash.
