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Friday, March 25, 2016

Aubrey McClendon's Biggest Backer in Danger of Losing Billions of Dollars

From Bloomberg:
McClendon, who died March 2 in a car crash, had recently been ousted from Chesapeake Energy Corp. when he invited a handful of private equity firms to bankroll what he called “the second half of my career.”

The terms outlined in the April 2013 pitch, obtained by Bloomberg, were so favorable to McClendon, however, that most investors turned him down, according to people familiar with the response. After some haggling, one of the few that accepted was Energy & Minerals Group, the firm led by [John] Raymond, son of the former Exxon Mobil Corp. Chief Executive Officer Lee Raymond. 
Though there’s still time to salvage the bets, much if not all of the estimated $2.6 billion that an EMG fund put into a half-dozen enterprises set up by McClendon’s American Energy Partners LP could be lost, according to Carin Dehne-Kiley, a Standard & Poor’s credit analyst, who tracks three of the four biggest ventures. Side bets by EMG investors added hundreds of millions of dollars to that figure, said two people familiar with the matter who asked not to be identified because the information is confidential. That, too, is at risk. 
“There’s a good chance these guys will default in the next 12 months,” barring an oil-price rebound, Dehne-Kiley said of the EMG-backed American Energy Partners ventures that she tracks. 
Dehne-Kiley, who has scrutinized the finances, said the ventures produce too little cash flow to support their current level of debt over the long run. EMG could take steps such as injecting more money to brace them until commodity prices recover, she said.
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