Fitch Rates Chesapeake's Proposed Convertible Preferred Stock 'B+'; Outlook Stable

Business Wire, Sept 9, 2005

CHICAGO -- Fitch Ratings has assigned a 'B ' rating to Chesapeake Energy Corp.'s (Chesapeake) offering of $300 million of 4.50% cumulative convertible preferred stock. Fitch also rates Chesapeake's senior unsecured debt at 'BB', senior secured revolving credit facility and hedge facility at 'BBB-', and existing convertible preferred stock at 'B '. The Rating Outlook is Stable.

Chesapeake has announced a public offering of $300 million of 4.50% cumulative convertible preferred stock as well as the pricing of a public offering of 8 million shares of the company's common stock at $32.72 per share under the company's existing shelf registration statement. Chesapeake intends to use the net proceeds from the offerings to repay debt under its bank credit facility and for general corporate purposes. The preferred stock offering also has an over-allotment option for $45 million in additional shares and the common stock offering includes an over-allotment option for an additional 1.2 million shares. Each share of the preferred stock will be able to be converted at any time at the option of the holder into 2.2639 shares of Chesapeake common stock, which is based on an initial conversion price of $44.17 per common share.

The offerings follow the company's announcement in early August that it had acquired or agreed to acquire $410 million of natural gas assets in transactions with four private companies. The transactions were initially financed with borrowings under the company's bank credit facility with permanent financing to come from a combination of equity and/or long-term senior unsecured notes. In mid-August, the company issued $600 million in new 6.5% senior notes due 2017 to refinance borrowings under the bank credit facility.

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