By Bernard Vaughan
NEW YORK (Reuters) - Chesapeake Energy Corp
Chesapeake asked for a declaratory judgment against The Bank of New York Mellon Trust Company N.A., the indenture trustee for the notes, to confirm that Chesapeake has the right to redeem them, according to the complaint.
"Chesapeake has recently learned that BNY Mellon is operating under the misunderstanding that the deadline for issuing such notice has already passed," the company's attorneys wrote in the complaint.
Chesapeake, which had $12 billion in long-term liabilities at year-end, said in a statement that its action was "part of a broader refinancing of its outstanding debt obligations."
A combination of low natural gas prices and heavy spending on oil and gas prices has left the company saddled with debt which it has pledged to pay down.
In its complaint, Chesapeake said it had until March 15 to notify noteholders of its intention to redeem the notes. The notes have a principal amount of $1.3 billion, an interest rate of 6.775 percent, and are due in 2019, according to the complaint.
The bank failed to distinguish the difference between a deadline for when notice must be given and when the redemption date occurs, the complaint said.
The Bank of New York Mellon has informed Chesapeake that it "will not cooperate or otherwise participate in the redemption process," according to the complaint. The bank's position is that any redemption occurring after March 15 would require Chesapeake "to pay the $400 million make whole to the noteholders."
Should the court not grant the declaratory relief, Chesapeake would have no remedy at law as a result of the bank's "error," the complaint said.
"Time is of the essence," the complaint said. "This is not a typical contractual dispute where one party's misreading of an agreement can be remedied after the fact."
The U.S. Securities and Exchange Commission is investigating Chesapeake and its outgoing CEO Aubrey McClendon for a controversial perk that granted him a share in each of the natural gas producer's wells. In January, McClendon announced his resignation, effective April 1.
A spokesman for Bank of New York Mellon declined to comment on Friday's court filing by Chesapeake.
(Reporting by Bernard Vaughan Additional reporting by Anna Driver, Jonathan Stempel; Editing by Richard Chang and David Gregorio)