(Adds details on bankruptcy preparations)
By David French and Mike Spector
NEW YORK, June 15 (Reuters) - Chesapeake Energy Corp is preparing to file for bankruptcy as soon as this week, said three people familiar with the matter, becoming the largest oil and gas producer to unravel after an energy market rout caused by the coronavirus outbreak.
The Oklahoma City-based company, co-founded by the late wildcatter Aubrey McClendon, is in the final stages of negotiating a roughly $900 million debtor-in-possession loan to support its operations while under Chapter 11 bankruptcy-court protection, two of the sources said.
The company is also in talks with creditors to “roll up” some of its existing debt and make it part of the bankruptcy loan, bringing the total debtor-in-possession financing closer to $2 billion, the sources added. The company is reeling under a mountain of debt totaling more than $9 billion.
Chesapeake is also attempting to negotiate an equity infusion from creditors to help it emerge from bankruptcy proceedings, one of the sources said.
Chesapeake plans to complete its negotiations with its creditors and file for bankruptcy as soon as Thursday, the three sources said. The timing could slip to next week depending on the progress the company makes in these discussions, the sources added.
If the company manages to emerge from bankruptcy, creditors that include Franklin Resources Inc, will take over Chesapeake in exchange for eliminating more than $7 billion of its debt under the outlines of a plan being negotiated, one of the sources said. Franklin is among Chesapeake’s most significant creditors, holding large portions of its debt.
The sources requested anonymity because the bankruptcy preparations are confidential. Chesapeake and Franklin did not immediately respond to requests for comment. (Reporting by David French and Mike Spector; Editing by Christian Schmollinger)