Chesapeake CEO accused of arranging a new $450 million loan from financier

by Tom Carlson | Tuesday, May 8, 2012 | 449 views

In a new revelation , Chesapeake Energy CEO Aubrey McClendon , weeks before getting stripped  from chairmanship  due to his financial dealings  ; apparently had arranged for a loan of $450 million from a longtime banker. The loan , had been arranged by EIG Global Energy Partners , the investment management firm which at that time was also helping Chesapeake for a round of financing worth $1.25 billion.

Inclusive of this loan , the financing for McClendon from EIG in 2010 amounts to $1.33 billion and the balance due to $1.1 billion . His life insurance policy and personal stakes  helped him secure the amount , which still remain in the wells to be drilled by management of Chesapeake . Spokespersons for neither McClendon nor Chesapeake were available for comments when contacted.

Insight into the latest investigations show that McClendon heavily borrowed , from EIG mostly ,  against the interests in the wells belonging to Chesapeake .

In the reports that came out last week , McClendon was shown co- owning and investing in 1 $200 million hedge fund which was buying and selling the same commodities as produced by Chesapeake.

A conflict in the interests of the loans prompted an outcry which led to an inquiry by the Internal revenue Service and the Securities and Exchange Commission . Following this was removal of McClendon as the chairman from Chesapeake’s board , culminating a controversial perk around the borrowings.

McClendon in the meanwhile , has taken out loans since 2009 from various lenders including EIG worth $1.55 billion for funding his participation in the Founders Well Participation program from Chesapeake. This has enabled him in receiving , in return of shouldering  the same percentage of wells’ costs , a stake of 2.5 % in all wells drilled by Chesapeake .

The last loan had been arranged through Pelican Energy LLC , a firm, formed on March 6 ,  controlled by McClendon .

The deal which had been initially been intended to be somewhere around $750 million was later scaled down after  the board announced the ending of the well stake perk , now slated to conclude in the June of 2014.

Financing for McClendon started to close down after EIG joined hands with hedge funds and investment firms in the likes of Magnetar Capital and TPG capital,  for purchase of preferred shares in a subsidiary newly formed by Chesapeake having some interest in the wells of the company. EIG’s investment in the same was $100 million , for CHK Cleveland Tonkawa , raising $1.25 billion for Chesapeake.

Like it? Share it!

Leave A Response