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Advising a Lender Holding $2 Billion of Debt Through Restructuring

In early 2020, Chesapeake Energy began outreach to its key stakeholders as part of a broader discussion around restructuring its balance sheet, which included approximately $9 billion in debt. Franklin Advisers, the largest single holder of debt in the capital structure at more than $2.1 billion, engaged FTI Consulting to serve as its financial advisor during the lead-up to and Chapter 11 bankruptcy of the company.

Our Impact

Franklin Advisers and Chesapeake Energy reached a Restructuring Support Agreement (“RSA”) ahead of the Chapter 11 filing.
Our review and analysis of Chesapeake Energy’s business plan, reserves and forecasted liquidity provided Franklin Advisers with a deeper understanding of the long-term value proposition and the impact on cash flow from volatility in commodity prices, which informed the negotiations for the post-reorganization capital structure and equity splits.
FTI Consulting’s analysis of the debtor-in-possession (“DIP”) budget and underlying assumptions ensured the size and terms of the facility were sufficient to fund the liquidity needs of the business during the bankruptcy process.

Our Role

FTI Consulting quickly analyzed and developed scenarios reflecting Franklin Advisers’ estimated recovery under various distributable value and lien perfection scenarios, aiding in negotiation tactics and RSA discussions.
A team of oil and gas experts, including in-house petroleum engineers, evaluated the underlying reserves and ran multiple commodity price scenarios to arrive at a range of enterprise value.
Our in-house hedging experts analyzed Chesapeake Energy’s complex hedge book and assessed its value to the ongoing business and its value in a liquidation.
FTI Consulting’s subject matter experts reviewed and analyzed expert reports put forth by various competing stakeholders as part of a 13-day contested confirmation hearing to assist counsel and Franklin Advisers in their ongoing strategy.