No one is going to buy CHK
No one is going to buy CHK with all that debt. The debt is killing the company. There is no way for the company to turn a profit dragging around $10B+ in debt.
If someone really cared about getting CHK assets, they would buy the most senior of the debt, and wait for the company to go bankrupt. Buying the common shares are nothing more than an option that a miracle happens and gas prices go back up. While it is, in theory possible, that could happen. It is not likely. Here in the Northeast we had a few cold days this last weekend, but most of the rest of the winter was way warmer than normal, and tomorrow, Tuesday, it may be back in the 40s and even get to 50. Winter may be over in a few weeks and storage of oil and gas are near all time highs, there has been discussion of storage room running out within a matter of weeks.
While the company has no 'plans' to file bankruptcy, it may very well still happen in spite of their protests to the contrary. If the Q4 2015 earnings release is a disaster, the company may not be able to go ahead with plans to pay the $500 million in bonds on March 15, 2016 and still have to file bankruptcy.
Even without a bankruptcy filing, I expect the common shares will decline to zero as people begin to realize that the common shares are ownership on a deeply in debt company that is never going to turn a profit and will be dead within a matter of months, if not weeks.
CHK situation is so bad off that even the preferred looks dead, along with some of the junior debt classes.
Anyone lucky enough to have bought the March 2016 bonds for 80, that are now 90 or higher; should sell (i.e. 'take the money and run'). While they might miss out on a payoff at maturity of 10 points, they also do not run the risk that CHK 'plans' to not file bankruptcy are wrong and they end up filings, putting the bonds at risk of a large loss.
Louis J. Desy Jr.
