In an article published in 2014, we advised distressed investors to be on the lookout for a decision from the U.S. Court of Appeals for the Second Circuit addressing an ongoing dispute between Chesapeake Energy Corp. and certain of its noteholders. In April 2013, the Southern District of New York held that Chesapeake Energy Corporation had the right to redeem certain unsecured notes at par value plus accrued interest because the period during which Chesapeake could redeem the notes on such terms had not expired.1 However, in a 2-1 panel decision, the Second Circuit reversed the district court’s findings.
Interestingly, while the Southern District had found that the disputed indenture provisions were unambiguous in adopting the interpretation advanced by Chesapeake, the Second Circuit also held that the disputed provisions were unambiguous but ruled in favor of the noteholders. As discussed below, the Second Circuit’s opinion was based on its conclusion that Chesapeake failed to provide adequate notice to “redeem” the notes under the meaning ascribed to this term in the applicable indenture provisions.
Factual Background
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