NEW YORK (TheStreet) -- Chesapeake Energy (CHK) - Get Report stock is down by 33.82% to $2.03 on heavy trading volume this afternoon, as the oil and gas company has hired lawyers from Kirkland & Ellis to help restructure a $9.8 billion debt load, Debtwire reported.
Chesapeake Energy released a statement late this morning claiming that it has no plans to pursue bankruptcy and is "aggressively seeking to maximize value for all shareholders."
Chesapeake Energy's debt load has ballooned to eight times more than its market value, pressuring the company to cancel drilling projects, reduce its workforce and close offices to better contend with tumbling oil and gas prices, Bloomberg reports.
The company has $1.3 billion in debts maturing by the end of 2017, and analysts expect Chesapeake Energy to face a cash shortfall of more than $1 billion during the next two years, Bloomberg adds.
Also pushing shares lower today is investor concern that Chesapeake Energy will be unable to make a coupon payment expected in the middle of March.
Chesapeake Energy's notes due in March plunged by a record amount, to 74.5 cents from 95 cents last week, according to Bloomberg.
Last month, Standard & Poor lowered its credit rating for Chesapeake Energy to "CCC+," warning that its debt leverage is unsustainable.
About 67.19 million shares of Chesapeake Energy have been traded so far today, well above the company's average trading volume of roughly 26.22 million shares per day.
Insight from TheStreet's Research Team:
Chesapeake Energy has a $500 million senior note coming due in March. Many have questioned the company's ability to cover that note as well as service its $11.6 billion debt load. While the company appeared to have sufficient assets to cover the note as of data it provided in the third quarter, it has also acknowledged that it has a lot of work to do to get its debt burden under control. Most recently, Chesapeake suspended its preferred dividend, which it estimates will help them to save $170 million annually. The company plans to use those funds to repurchase some of its debt, which is trading at steep discounts.
Indeed as the company's stock drops, the bid price of its $500 million senior note has plunged on Monday to $76 from $95, according to data compiled by Bloomberg. As the note is senior, the note has priority status should the company liquidate, but the note is also unsecured, meaning it is not backed by assets. Should things take a turn for the worse, bondholders may not receive their full principal and interest payments. This uncertainty could explain why the notes have plunged in tandem with Chesapeake's stock on reports of the company hiring outside advisors.
- Carleton English, 'Chesapeake Energy Plunges on Reports It Hired Outside Advisors' originally published 2/8/2016 on RealMoney.com.
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Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D.
Chesapeake Energy's weaknesses include its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
You can view the full analysis from the report here: CHK
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.