Timing is Everything: Chesapeake to Pay An Additional $59M For Late Redemption Notice

Jul 16 2015 | 5:32pm ET

(Reuters) - A federal judge on Thursday said Chesapeake Energy must pay an additional $59.1 million to some investors whose bonds it redeemed early, boosting the natural gas company's total payout to $438.7 million.

U.S. District Judge Paul Engelmayer in Manhattan said the new payment reflects prejudgment interest at a 6.775 percent annual rate.

Engelmayer had ruled on July 10 that Chesapeake should pay nearly $379.7 million plus the interest to holders of its $1.3 billion of 6.775 percent notes maturing in 2019.

The judge ruled after a federal appeals court last November said Chesapeake had waited one month too long to tell investors it planned to redeem the notes six years early.

Bank of New York Mellon was the trustee for the bondholders. It had argued that Oklahoma City-based Chesapeake should pay a special, higher price because of the redemption.

Chesapeake intended to redeem the bonds early to reduce a debt burden accumulated under former Chief Executive Aubrey McClendon, and offset falling natural gas prices.

The case is Chesapeake Energy Corp v. Bank of New York Mellon Trust, U.S. District Court, Southern District of New York, No. 13-01582.

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