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Chesapeake shores up capital with $1.25 billion debt deal

(Reuters) - U.S. natural gas producer Chesapeake Energy Corp (CHK.N) closed a private placement of $1.25 billion of debt on Wednesday, shoring up capital for debt repayment 10 months after it said it had no plans to file for bankruptcy.

Chesapeake, struggling with a huge pile of debt taken for shale development, said it could convert the 10-year notes to equity in three years if its stock trades above 130 percent of the conversion price for a specified period.

The company also said it exchanged its common shares for preferred shares representing about $1.2 billion of liquidation value, at a discount of over 40 percent.

"Through the transactions that closed today, we have substantially improved our capital structure," said Chesapeake Chief Executive Doug Lawler.

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"These transactions represent major steps towards reaching our financial goals of $2-3 billion of debt reduction and growing production within free cash flow."

The company's total debt stood at about $8.7 billion as of June 30.

The Oklahoma-based company said its cash on hand as of Sept. 30 was about $1 billion, pro forma for the convertible debt issuance.

Shares of the company were up 2 cents at $6.82 in extended trading.

(Reporting by Vishaka George in Bengaluru)