Oklahoma City-based Chesapeake Energy (NYSE:CHK) announced yesterday that it is planning to borrow $2 billion, which the company will use to pay down existing debt.

It is working with three banks to arrange an unsecured five-year term loan facility, the company announced in a press release touting the new debt as enabling the company to be more liquid and financially sound.

"The board and management believe current corporate loan market conditions offer attractive refinancing opportunities on favorable terms," Archie Dunham, Chesapeake's nonexecutive chairman of the board, is quoted as saying. He said it makes sense for Chesapeake to go through with the new loan because the company would then be able to repay higher cost debt, effectively reducing its cost of capital.

This move, along with plans to sell a portion of its assets, is part of an effort to reduce debt levels to at leaset $9.5 billion. At the end of the third quarter the company had over $15.7 billion in long-term debt.