CHK Chesapeake Energy Corporation

CHESAPEAKE ENERGY

Credit Pact Reached; Stock Rises Sharply

Chesapeake Energy Corp. said it has reached an amended agreement with its lenders that affirmed the energy company's revolving credit facility at $4 billion but expanded the collateral backing the debt to include most of the company's assets.

The company's shares, down 71% in the past 12 months, were up 74 cents, or nearly 20%, to $4.50 in 4 p.m. New York Stock Exchange composite trading.

According to a regulatory filing, the agreement includes "the granting of liens and security interests on substantially all of the company's assets, including mortgages encumbering 90% of all of the company's proved oil and gas properties, all hedge contracts and personal property" and other items.

Meanwhile, the next review of the credit facility's borrowing base was postponed to June 15, 2017, from Oct. 30, 2016, according to a regulatory filing. Afterward, the borrowing base will be redetermined semiannually. Under the amended agreement, Chesapeake will be allowed to incur up to $2.5 billion of first-lien debt, with its existing lenders receiving priority when the debt is repaid. Chesapeake's senior secured debt ratio covenant was temporarily suspended until September 2017 and its interest coverage ratio requirement was reduced through March of next year.

Under the accord, the energy company is required to maintain liquidity of at least $500 million, which would increase to $750 million if certain credit metrics aren't met at year's end.

The Oklahoma City company, co-founded by the late Aubrey McClendon, has been working to shore up its balance sheet as commodity prices remain low. Chesapeake grew to become one of the dominant U.S. gas explorers during the shale boom. Fueled by cheap debt, the company expanded aggressively in Ohio, Texas and other parts of the U.S., becoming the second-largest U.S. natural-gas producer behind Exxon Mobil Corp. Mr. McClendon died in a car crash last month, a day after he was indicted on a charge of conspiring to rig bids on oil and gas leases in Oklahoma. A pioneer the shale energy boom, his extreme risk-taking had caused him personal and professional financial hardships that spurred activist investors, including Carl Icahn, to oust him as Chesapeake's chief executive in 2013.

--Tess Stynes

AIR FRANCE

Carrier Makes Offer to Pilots

PARIS -- Air France has made an offer to its pilots in an effort to end monthslong negotiations over cost-cutting as the airline seeks to become more competitive.

The company asked pilots to accept lower hourly pay in exchange for 5% to 10% more flying hours so that average revenue for pilots won't fall, Frederic Gagey, chief executive of the French arm of Franco-Dutch Air France-KLM, told reporters on Monday.

"The measures we proposed will increase the hours flown, while increasing salaries at a lower pace," Mr. Gagey said.

Pilots unions have until May 2 to respond to the proposal, he said.

The proposal made by Air France's management comes after several months of talks with restive pilots to find ways to cut costs, while avoiding an outright clash like the two-week strike that cost the company almost EUR500 million ($570 million) in 2014.

Mr. Gagey said the company also committed to hire more than 600 pilots by 2020 that would raise the number in the company to 3,900 from 3,600 currently, taking into account expected departures.

Emmanuel Mistrali, spokesman for the largest union of Air France pilots, wasn't immediately available for comment.

--Inti Landauro

NATIONAL OILWELL VARCO

Dividend to Drop as Prices Decline

National Oilwell Varco Inc. cut its dividend by 89%, as the maker of drilling equipment and provider of oil-field services moves to preserve capital amid a sustained decline in energy prices.

The company also said it expects its first-quarter revenue to decline by about 20% sequentially from the prior quarter's revenue. Analysts were expecting a roughly 12% sequential decline. The revenue drop would be about 55% from same quarter a year earlier.

National Oilwell Varco's quarterly dividend will fall to five cents a share from 46 cents per share previously. The dividend reduction will increase its net cash flow by about $615 million a year.

The company said it remains strong financially despite "significantly diminished" demand for its equipment and services.

Earlier this month the company said that mass layoffs in its Norwegian unit would continue even after the company shed half its workforce there. Over the past year National Oilwell Varco shed 1,800 permanent jobs and 600 contractors in Norway amid weaker activity in the North Sea.

Shares of the company were inactive premarket. They have fallen 47% in the past 12 months.

--Austen Hufford

PATHGROUP

Bank Hired to Study A Possible Sale

Primus Capital and Brentwood Capital Partners hired an investment bank to explore a possible sale of clinical laboratory and anatomic pathology testing provider PathGroup Inc., said people familiar with the situation.

Cleveland private-equity firm Primus hired New York financial services firm MTS Health Partners LP to advise on the deal, which has passed the first round of bidding, the people said.

PathGroup, Brentwood, Tenn., recorded about $50 million in earnings before interest, taxes, depreciation and amortization for 2015, up from about $20 million in Ebitda when Primus invested in the company in 2010, according to the people.

The people said a sale, based on the price multiple on recent sales, likely would value the company at about nine to 10 times its Ebitda, translating to a roughly $450 million-to-$500 million price tag.

Founded in 1997, PathGroup provides diagnostic services covering all aspects of clinical and anatomic pathology to physician offices, hospitals, surgery centers and clinics in the midsouth and Southeast U.S.

Primus led a minority equity investment in PathGroup six years ago that included a co-investment by Brentwood Capital Partners, Franklin, Tenn. The investment and new debt facilities contributed to more than $100 million in new capital to PathGroup, investment bank Brentwood Capital Advisors said in a news release at the time.

Brentwood Capital Partners makes later-stage co-investments with private-equity firms in control and noncontrol investment banking transactions in which Brentwood Capital Advisors serves as financial adviser.

Diagnostics and medical laboratories in the U.S. came under pressure in the past few years on reimbursement cuts, but the industry is poised for expansion. It is a $54.3 billion industry with an annual growth rate of 1.5% in the next five years, according to data provider IBISWorld, which said Medicare's and Medicaid's coverage of most clinical diagnostic laboratory services is bolstering industry growth.

Primus invests in high-growth companies in health-care, business services, communications, and for-profit education industry sectors. The firm has offices in Cleveland and Atlanta.

--Amy Or

(END) Dow Jones Newswires

April 12, 2016 02:16 ET (06:16 GMT)

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