CORPORATESISSUER COMMENT 3 SEPTEMBER 2015CHESAPEAKE ENERGY CORPORATION (CHK)Moodys Senior Unsecured Rating Ba1Moodys Outlook STABond-Implied Rating Caa2CDS-Implied Rating Caa1EDF-Implied Rating Caa1As of 9/2/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewChesapeake Energy: All Three Market-Implied Ratings Decline The bond-, CDS-, and EDF'-implied ratings for Chesapeake Energy all worsened over the last year.FIGURE 1. CHESAPEAKE ENERGY: MOODYS AND MARKET-IMPLIED RATINGS, LAST YEAR (DAILY DATA)The bond-implied rating drop was the worst of the three, falling seven notches from Ba1 in September 2014 to its current Caa2 (Figure 1). This market-implied rating is at its lowest level of the past five years.Chesapeake Energys EDF-implied rating dropped from Ba3 12 months ago to Caa1. The EDF-implied rating has not been this low since January 2013.MOODY'S ANALYTICS CORPORATES2 3 SEPTEMBER 2015 MARKET SIGNALS REVIEW: CHESAPEAKE ENERGY: ALL THREE MARKET-IMPLIED RATINGS DECLINEThe companys CDS-implied rating is Caa1, having declined by six notches from Ba1 a year ago. The CDS-implied rating dipped to Caa2 on two occasions briefly over the last 12 months.According to our ratings gap-conditioned transition matrices, companies rated Ba1 with a bond-implied rating of Caa2 outperformed the broad market 71% of the time over the following 12 months, matched the markets performance 6% of the time, and underperformed the broad market 23% of the time.Readers will recall that when a market-implied rating falls the underlying securities have underperformed the broad market. 1Over the last twelve months, Chesapeake Energys bond- , CDS-, and EDF-implied ratings gaps have all widened. The bond-implied ratings gap sli...
