Published April 01, 2013
NEW YORK – Bank of New York Mellon Corp will depose newly departed Chesapeake Energy Corp Chief Executive Aubrey McClendon in its dispute with the energy company over a bond redemption, lawyers for both companies said at a hearing in federal court on Monday.
Chesapeake last month sued Bank of New York Mellon, the bond trustee for a $1.3 billion debt issue, seeking to block the bank from interfering with Chesapeake's proposal to redeem the debt at face value.
Bank of New York Mellon believes Chesapeake would have to pay noteholders a $400 million make-whole payment because Chesapeake is trying to redeem the notes after a March 15 deadline.
The bank believes that McClendon "clearly has knowledge" of Chesapeake's rationale for redeeming the bonds early, Benjamin Nagin, a lawyer for the bank, said at the hearing in federal court in Manhattan.
McClendon's departure from Chesapeake, which became effective on Monday, is unrelated to the bond dispute. His departure was announced in January after heavy spending on oil and gas properties caused a liquidity crunch and the price of natural gas collapsed. The U.S. Securities and Exchange Commission is also investigating a stake in company wells the company granted McClendon.
On Friday, Chesapeake appointed its chief operating officer, Steven Dixon, as interim chief executive. Dixon will also serve on a panel to find McClendon's replacement.
U.S. District Judge Paul Engelmayer, who is overseeing the bond dispute, on Monday expressed skepticism on McClendon's relevance to the case, given that the trial is due to start April 23.
A lawyer for Chesapeake, Richard Ziegler, said at the hearing, "We're going to produce him," referring to McClendon.
It is unclear when McClendon would be deposed. A spokesman for Chesapeake did not immediately comment.
At the hearing, Steven Bierman, another lawyer for the bank, also modified the bank's position on the early redemption notice.
He said that if Engelmayer finds that the notice was untimely, the bank will not argue that it should trigger the make-whole payment, but would instead simply view the notice as void.
"We think that's a very positive development," said Ziegler, Chesapeake's lawyer, at the hearing.
Chesapeake believes it only had to notify investors of its plans to redeem the notes by March 15, while Bank of New York argues that the redemption had to take place by that date.
The case is Chesapeake Energy Corp v. Bank of New York Mellon Trust Co, U.S. District Court, Southern District of New York, No. 13-01582.
(Reporting By Bernard Vaughan; Editing by Leslie Adler)