Chesapeake ex-CEO McClendon to be deposed in bond dispute

Mon Apr 1, 2013 11:58am EDT
 
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By Bernard Vaughan

NEW YORK (Reuters) - Bank of New York Mellon Corp (BK.N: Quote) will depose newly departed Chesapeake Energy Corp (CHK.N: Quote) Chief Executive Aubrey McClendon in its dispute with the energy company over a bond redemption, lawyers for both companies said at a hearing in federal court on Monday.

Chesapeake last month sued Bank of New York Mellon, the bond trustee for a $1.3 billion debt issue, seeking to block the bank from interfering with Chesapeake's proposal to redeem the debt at face value.

Bank of New York Mellon believes Chesapeake would have to pay noteholders a $400 million make-whole payment because Chesapeake is trying to redeem the notes after a March 15 deadline.

The bank believes that McClendon "clearly has knowledge" of Chesapeake's rationale for redeeming the bonds early, Benjamin Nagin, a lawyer for the bank, said at the hearing in federal court in Manhattan.

McClendon's departure from Chesapeake, which became effective on Monday, is unrelated to the bond dispute. His departure was announced in January after heavy spending on oil and gas properties caused a liquidity crunch and the price of natural gas collapsed. The U.S. Securities and Exchange Commission is also investigating a stake in company wells the company granted McClendon.

On Friday, Chesapeake appointed its chief operating officer, Steven Dixon, as interim chief executive. Dixon will also serve on a panel to find McClendon's replacement.

U.S. District Judge Paul Engelmayer, who is overseeing the bond dispute, on Monday expressed skepticism on McClendon's relevance to the case, given that the trial is due to start April 23.

A lawyer for Chesapeake, Richard Ziegler, said at the hearing, "We're going to produce him," referring to McClendon.   Continued...

 
Chief Executive Officer, Chairman, and Co-founder of Chesapeake Energy Corporation Aubrey McClendon walks through the French Quarter in New Orleans, Louisiana March 26, 2012. REUTERS/Sean Gardner