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The total cash would be $1.2 billion, which could be used to pay off the $1.271 billion current funded debt.
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They would receive $307 million cash via A Warrants, $397 million via B Warrants, and $496 million via C Warrants. Since the current CHK stock price of $45 is above all the warrant exercise prices, the company could almost have no debt if the warrants are exercised. In the past, most investors considered Chesapeake to be very highly leveraged. Given the very low financial leverage now, this multiple seems reasonable. This enterprise value is implying that the market is valuing Chesapeake at an EBITDAX multiple of 4.05x based on an estimated EBITDAX of $1.422 billion (see below). The actual current enterprise value, using the current CHK price of $45, is $5.761 billion (not factoring in the impact from warrants). Clearly, the valuation has increased because of lower debt than expected and higher energy prices. Using the amended disclosure statement enterprise value of $4.1 billion and the original estimate of net debt of $1.794 billion, the equity value would be $2.306 billion or $23.06 per new share with 100 million new shares. This lower debt figure also increases the estimated equity value. The debt of $1.271 billion when they exited bankruptcy is significantly lower than $1.804 billion projected in their October 30 amended disclosure statement, partially due to the sale of their Mid-Con assets for $130.45 million last December. The amended disclosure statement enterprise value was $3.5 billion-$4.7 billion with a mid-point of $4.1 billion, but those figures were based on much lower energy prices. Not factoring in any impact by warrants, there are 100 million new Chesapeake shares outstanding, which implies an equity value of $38.68 per new share using Judge Jones' enterprise number.
#CHK STOCK UPDATE#
Using the current funded debt of $1.271 billion and the projected $10 million cash contained in the amended disclosure statement (docket 1645) (there was no recent update on actual cash), the $5.129 billion enterprise value would imply an equity value of $3.868 billion. I am actually not including this as part of their recovery because many bankruptcy courts have ruled that potential profits from rights offer participations are a completely separate figure that should not be considered as a recovery for their allowed claims.) Valuationīankruptcy Judge Jones created his own enterprise value for Chesapeake after rejecting various other experts' values asserted during the confirmation hearings. *B Warrants (CHKEZ) with exercise price of $32.13 and expiration date of February 9, 2026. *A Warrants (CHKEW) with exercise price of $27.63 and expiration date of February 9, 2026. *C Warrants (CHKEL) with exercise price of $36.18 and expiration date of February 9, 2026. Effective selling date is Februfor those still holding any shares. Distribution Under the Ch.11 Reorganization Plan The fifth amended reorganization plan ( docket 2833) distributes recoveries for allowed claims: Common Shareholders and Preferred Shareholders (Class 10) They also expect to save a significant amount of money on pipeline contracts. The new company will have $1.271 billion in funded debt compared to $9.095 billion last June 30. The opening trading price of $43 for the new CHK common stock was much higher than the equity value implied in their $5.129 billion enterprise value. Former shareholders are getting no recovery, including preferred shareholders. Incredibly, the CHKAQ common stock still traded at $3.05 when trading was stopped. After a very lengthy confirmation process, Chesapeake Energy ( NASDAQ: CHK), exited Ch.11 bankruptcy on February 9.