(Bloomberg) -- Chesapeake Energy Corp. won court approval for a reorganization plan that slashes about $7 billion in debt in exchange for handing over ownership to its senior lenders, including Franklin Resources Inc.The decision by U.S. Bankruptcy Judge David Jones caps a years-long effort to repair the company’s finances, which became bloated after repeated borrowing to fuel its expansion.The final push came over the objection of unsecured bondholders and other lower-ranking creditors, who claim senior lenders were getting Chesapeake at a discount just six months after they refinanced their debt.Jones rejected those complaints along with a last-minute, competing reorganization proposal offered by Jefferies Financial Group Inc., Owl Creek Asset Management and several other investment firms.“Management has dealt with an incredibly difficult set of problems in an unprecedented time,” Jones said. “I can’t imagine sitting on a board or being in management given the events over the last three years.”Opposition RebuffedIn 2013, when current Chief Executive Officer Doug Lawler took over, the company owed creditors more than $20 billion. The former Anadarko Petroleum Corp. executive helped drive that figure down to about $9.2 billion in funded debt by the time Chesapeake was forced into bankruptcy last year.Opposition to the plan was led by a committee representing unsecured creditors owed more than $4.4 billion, including bondholders and Chesapeake’s many suppliers. The group argued they should get more than the pennies on the dollar they were being offered. They sought permission to file a lawsuit against the company and Franklin for refinancing actions undertaken a few months before Chesapeake declared bankruptcy.A representative for Oklahoma City-based Chesapeake didn’t respond to emails seeking comment, while a spokesperson for San Mateo, California-based Franklin declined to comment.In a pair of proposed lawsuits, the unsecured creditors accused Chesapeake of undertaking two refinancing deals that only benefited Franklin and other favored lenders at the expense of lower-ranking debt holders. One transaction refinanced $1.5 billion in debt owed by an insolvent unit in a way that “infected” the rest of the company by spreading repayment responsibility to the broader corporate family, according to court papers.The other turned $2.2 billion of unsecured debt into secured debt that carries a higher interest rate.Jones said there was “zero evidence in the record to support” those arguments. He refused to give the unsecured creditors the right to challenge those transactions.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
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