Chesapeake Loan Brings Company Debt Total To New Record

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Chesapeake Energy
Two Chesapeake Energy Corp. (NYSE: CHK) directors -- members of the audit committee now dealing with the personal finances of the company's CEO, Aubrey K. McClendon, shown here -- offered their resignations Friday after they attracted little support at the annual shareholders meeting.

Facing a dropoff in cash in recent months, Chesapeake Energy (NYSE: CHK), the second-largest producer of natural gas in the United States, announced last week it got a $3 billion loan from Goldman Sachs, bringing the company's debt to a new record.

Chesapeake is in the midst of selling off close to $12 billion in assets throughout the rest of the year, and will use the loan to keep the company afloat as it finds potential buyers.

The loan will be repaid by the proceeds of future asset sales, said the company in a statement on Friday.

This short-term loan from Goldman and Jefferies provides us with significant additional financial flexibility as we execute our asset sales during the remainder of 2012, said Aubrey K. McClendon, Chairman and CEO, who has himself borrowed $1.1 billion backed by his personal stakes in Chesapeake's natural gas wells.

The $3 billion loan has bolstered the company's debt level to $15.6 billion, a company record, reported Bloomberg.

Earlier this month, Chesapeake announced that the Securities and Exchange Commission has launched an inquiry into the company's finances, and that Chesapeake was going to strip McClendon of the company's chairmanship, Bloomberg reported.

Chesapeake has been aggressive in acquiring roughly 2.5 million acres through leasing for oil and natural gas drilling over the years and amassed some debt to do so.

With the plummeting of natural gas prices, Chesapeake has scaled back some of its production due to low natural gas market prices. In April, it sold additional billions in assets to cover mounting costs and debt, as prices for natural gas fell.

On the New York Mercantile Exchange, natural gas prices on Monday dropped off again to $2.52 per 1,000 cubic, after almost reaching the $3 feet mark late last week.I

n Monday trading in New York, CHK jumped to $16.10 a share, up from $14.81 on Friday.

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