{"id":18342,"date":"2016-02-26T16:10:06","date_gmt":"2016-02-26T21:10:06","guid":{"rendered":"http:\/\/olduvai.ca\/?p=18342"},"modified":"2016-02-26T16:10:20","modified_gmt":"2016-02-26T21:10:20","slug":"chesapeakes-aig-moment-energy-giant-faces-1-billion-in-collateral-calls","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=18342","title":{"rendered":"Chesapeake’s AIG Moment: Energy Giant Faces $1 Billion In Collateral Calls"},"content":{"rendered":"

Chesapeake’s AIG Moment: Energy Giant Faces $1 Billion In Collateral Calls<\/a><\/h3>\n
Back on February 10, when looking at Carl Icahn’s darling Chesapeake, whose stock had plunged to effectively record lows on imminent bankruptcy concerns,\u00a0we said that for anyone brave enough\u00a0<\/a>to take the plunge, the “Trade of the Year”<\/strong>\u00a0would be to go long a specific bond, the $500 million in 3.25s of March 2016 which were maturing in just over a month, and which on February 10 were yielding 300% at a price of 80.5 cents on the dollar.<\/div>\n
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And then, just two days later, in an unexpected turn, Chesapeake announced that contrary to public opinion, the troubled energy giant “is planning to pay $500 million of debt maturing in March, using a combination of cash on hand and other liquidity that may include its credit line, according to a person with knowledge of the matter.” The issue referenced was precisely the bond that was our “trade of the year.”<\/p>\n

To be sure, the bond promptly surged, even as the stock priced tumbled, on what was seen as a very bondholder-friendly action (and thus to the detriment of shareholders) and hit a price of 95 cents while the stock tumbled by 15%, generating a 30% return for anyone who had decided to go along. At that moment\u00a0we urged anyone in the trade\u00a0<\/a>to take their profits and go home, taking a few weeks, or the rest of 2016, off.<\/p>\n

A quick update since then shows that those same bonds are currently trading effectively at par (99.25 cents)…<\/p>\n

\"\"<\/p>\n

… suggesting that the risk of a near-term Chesapeake bankruptcy may be gone for now.<\/p>\n

But is it truly off the table?<\/p>\n

Sadly, we think that despite the brief hiccup in optimism, CHK’s troubles are about to get worse, even if this particular bond is ultimately repaid, for one simple reason:\u00a0in its 10-K filed yesterday, Chesapeake announced that it has just reached its own “AIG moment<\/strong>.”<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Chesapeake’s AIG Moment: Energy Giant Faces $1 Billion In Collateral Calls Back on February 10, when looking at Carl Icahn’s darling Chesapeake, whose stock had plunged to effectively record lows on imminent bankruptcy concerns,\u00a0we said that for anyone brave enough\u00a0to take the plunge, the “Trade of the Year”\u00a0would be to go long a specific bond, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[3],"tags":[9045,1361,1719,7453,12684,12685,11634,7475,548,554,8581,7530],"class_list":["post-18342","post","type-post","status-publish","format-standard","hentry","category-energy-2","tag-aig","tag-bankruptcy","tag-bond","tag-chesapeake-energy","tag-chk","tag-collateral-calls","tag-counterparties","tag-credit-line","tag-nat-gas","tag-natural-gas","tag-rating-agencies","tag-ratings"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18342","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=18342"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18342\/revisions"}],"predecessor-version":[{"id":18344,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18342\/revisions\/18344"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=18342"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=18342"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=18342"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}