Chesapeake Energy appears to have avoided insolvency, thanks to its creditors’ decision to lift some of the barriers restricting its access to loans. This move allowed the company to shore up its financial position by negotiating a $1.5 billion credit deal with a group of banks and arranging to buy back $700 million worth of bonds that are due to mature in 2025.
The company has already reaped some benefits from its push to avoid bankruptcy. As of the close of business on December 4, its stock and bond prices were up.
Nevertheless, market observers remain concerned about Chesapeake’s long-term viability. James Spicer, a high-yield analyst for TD Securities, told Bloomberg he did not believe the new financing programs would solve the company’s fundamental problems.
“The underlying issue is generating free cash flow,” he said. “The company is saying it can, but I think it’s very much a show-me story for investors.”