Chesapeake, Bank of New York wrap up trial over bond redemption
By Bernard Vaughan
NEW YORK (Reuters) - Chesapeake Energy Corp (CHK.N: Quote) and Bank of New York Mellon (BK.N: Quote) concluded an expedited trial on Tuesday over the energy company's effort to redeem $1.3 billion notes at par.
District Judge Paul Engelmayer in Manhattan, who is hearing the case without a jury, did not issue an immediate ruling.
Chesapeake, which faces a projected $3 billion cash shortfall this year, sued Bank of New York, the trustee for the bonds, on March 8. The dispute is centered around a few short paragraphs in the offering contract for the bonds.
The natural gas producer has argued that it had until March 15 to notify investors that it intended to redeem the bonds, which have an interest rate of 6.775 percent and mature in 2019, at par under an early redemption provision in the bond contract.
Bank of New York Mellon, however, said Chesapeake had to have completed the redemption by March 15, and that any redemption thereafter would require a $400 million payment to investors.
Witnesses for Chesapeake, including its Chief Financial Officer Domenic Dell'Osso, testified during a trial that started April 23 that the drafters of the contract had understood that March 15 was a notice deadline.
The company also sought to play down Bank of New York's role as one of an administrator that wasn't involved in negotiating terms or drafting the contract.
In his closing argument on Tuesday, Chesapeake lawyer Richard Ziegler called Bank of New York Mellon's position "absurd" and "patently unreasonable." Continued...