By Bernard Vaughan
NEW YORK (Reuters) - Chesapeake Energy Corp and Bank of New York Mellon concluded an expedited trial on Tuesday over the energy company's effort to redeem $1.3 billion notes at par.
District Judge Paul Engelmayer in Manhattan, who is hearing the case without a jury, did not issue an immediate ruling.
Chesapeake, which faces a projected $3 billion cash shortfall this year, sued Bank of New York, the trustee for the bonds, on March 8. The dispute is centered around a few short paragraphs in the offering contract for the bonds.
The natural gas producer has argued that it had until March 15 to notify investors that it intended to redeem the bonds, which have an interest rate of 6.775 percent and mature in 2019, at par under an early redemption provision in the bond contract.
Bank of New York Mellon, however, said Chesapeake had to have completed the redemption by March 15, and that any redemption thereafter would require a $400 million payment to investors.
Witnesses for Chesapeake, including its Chief Financial Officer Domenic Dell'Osso, testified during a trial that started April 23 that the drafters of the contract had understood that March 15 was a notice deadline.
The company also sought to play down Bank of New York's role as one of an administrator that wasn't involved in negotiating terms or drafting the contract.
In his closing argument on Tuesday, Chesapeake lawyer Richard Ziegler called Bank of New York Mellon's position "absurd" and "patently unreasonable."
"It simply doesn't compute," Ziegler said.
But how Chesapeake and the underwriter for the offering viewed the March 15 deadline was less important than how Bank of New York understood it as the trustee of the bonds, Steven Bierman, a lawyer for the bank, told Engelmayer.
He also argued that the testimony of the four witnesses was unreliable and should not factor in the judge's decision.
" should have gotten it right, they should have been clear," Bierman said. "It's on them if it's unclear, ultimately."
The lawsuit is separate from other legal matters Chesapeake is facing, including a U.S. Securities and Exchange Commission probe into a perk granting former CEO Aubrey McClendon a stake in company wells and a U.S. Department of Justice investigation into possible antitrust violations in Michigan land deals.
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 Martha Graybow)