Chesapeake, the second biggest natural gas producer in the U.S., argued it has until March 15 to issue a formal notice that it will redeem the notes early, while Bank of New York Mellon said the early redemption would need to be completed by that date to avoid the make-whole provision that would include paying interest.

In its filing today, Bank of New York Mellon argued Chesapeake isn't in danger of “irreparable harm” in the case, citing a standard for obtaining such an injunction, because the energy company can seek money damages if it wins and won't suffer permanent damage. The bank also said Chesapeake can't prove it has a likelihood of success — another requirement.

Bank of New York Mellon initially supported Chesapeake's plan when the energy company first discussed early redemption with the bank on Feb. 20, according to the complaint. Two days later, the bank changed its mind, Chesapeake said.

In a separate court filing today, several investors, calling themselves an “ad hoc noteholder group,” asked court permission to intervene in the litigation — a status that would allow them to attend hearings and file papers in the case.

Investor Group

They include Archer Capital Management LP, Ares Management LLC, Aurelius Capital Management LP, Carlson Capital LP, Cetus Capital LLC, Latigo Partners LLC, Monarch Alternative Capital LP, P. Schoenfeld Asset Management LP, River Birch Capital LLC and Taconic Capital Advisors LP.

“If Chesapeake chooses to issue a notice of redemption, it must live with the consequences of the terms in the indenture, and the court should not create a right that does not exist,” the noteholders said in their joint filing.

The group, whose outstanding notes are worth a total of about $250 million, argues Chesapeake seeks to “rewrite” the redemption provisions of the indenture. The noteholders called the requested injunction “drastic” and again cited a lack of irreparable harm to Chesapeake.

“There is no business to save, no reputation to protect, no unique contractual right to enforce,” the noteholders said in the filing. “This case indisputably is about money and money only. And, as such, there is no irreparable harm.”

Michael Kehs, a spokesman for Chesapeake, declined to comment on Bank of New York Mellon's filing.

Bank of New York Mellon “fails to distinguish the difference between a deadline for when notice must be given, and when the redemption date — the date on which payment is actually made to noteholders — occurs,” Chesapeake said in its complaint. “This is not a typical contractual dispute where one party's misreading of an agreement can be remedied after the fact.”

Chesapeake's 2019 securities yielded 5.61 percent, or 552 basis points more than comparable-maturity Treasuries, yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The 6.775 percent coupon on those bonds is 50 basis points higher than the average weighted coupon on all the company's outstanding debt, according to data compiled by Bloomberg.

The case is Chesapeake Energy Corp. v. The Bank of New York Mellon Trust Co., 13-cv-01582, U.S. District Court, Southern District of New York (Manhattan).

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