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Tue May 8, 2012 9:02pm EDT (Reuters) - In the weeks before Chesapeake Energy CEO AubreyMcClendon was stripped of his chairmanship over his personalfinancial dealings, he arranged an additional $450 million loanfrom a longtime backer, according to a person familiar with thetransaction. That loan, previously undisclosed, was made byinvestment-management firm EIG Global Energy Partners, which was atthe same time helping arrange a major $1.25 billion round offinancing for Chesapeake itself. The new loan brings the energy executive's total financing from EIGsince 2010 to $1.33 billion and his current balance due to $1.1billion, this person said. It was secured by McClendon's personalstakes in wells that have yet to be drilled by Chesapeake - and byhis own life-insurance policy. A spokesman for McClendon declined to comment; a spokesman forChesapeake didn't respond to a request for comment. The latest insight into McClendon's personal financial deals comesin the wake of an April 18 Reuters investigation that foundMcClendon had borrowed heavily against his interests in wells ownedby Chesapeake, mostly from EIG. Last week, Reuters reported that McClendon had co-owned andactively invested in a $200 million hedge fund that bought and soldthe same commodities produced by Chesapeake. An outcry over potential conflicts of interest in the loansprompted inquiries by the Securities and Exchange Commission andthe Internal Revenue Service. It also spurred Chesapeake's board onMay 1 to remove McClendon as chairman (though not as chiefexecutive) and to declare an early end to a controversial perk atthe center of the borrowings. All told, McClendon has taken out loans worth $1.55 billion since2009 from EIG and other lenders to fund his participation inChesapeake's Founders Well Participation Program. That perk enableshim to receive a stake of up to 2.5 percent in all the wellsChesapeake drills in return for shouldering the same percentage ofthe wells' costs. The latest McClendon loan was arranged in late March through aMcClendon-controlled company called Pelican Energy LLC, which wasformed on March 6. The deal was initially intended to be significantly larger, up to$750 million, said the person familiar with the transaction. It wasscaled back last week after the Chesapeake board announced theearly end to the well-stake perk, which is now slated to concludein June 2014. The newest financing for McClendon closed shortly before EIG joinedwith other investment firms and hedge funds, such as TPG Capitaland Magnetar Capital, in purchasing preferred shares in a newlyformed Chesapeake subsidiary that has an interest in some of thecompany's wells. EIG invested $100 million in that deal, called CHKCleveland Tonkawa, which raised $1.25 billion for Chesapeake. An EIG spokeswoman declined to comment on the newest loan or onconcerns of some analysts over EIG's dual role as a financier toChesapeake and its CEO. In an April 23 letter to investors in two of EIG's investmentfunds, EIG chief executive officer R. Blair Thomas said it is"simply untrue" that there was any conflict of interest in itsloans to McClendon and dealings with Chesapeake. The Securities and Exchange Commission has opened an informalinquiry into Chesapeake's well program and the transactionsinvolving McClendon. In the letter, Thomas discussed two earlier loan deals that EIG haddone with McClendon, involving McClendon-controlled entities calledLarchmont Resources LLC and Jamestown Resources LLC. There was nomention in the letter of the financing deal completed in March toPelican Energy. The person familiar with the deal said Pelican was not mentioned inthe letter because EIG clients "already knew about Pelican" and theloan hasn't been disbursed yet. This person added that when Pelican was launched, EIG sent a letterand "information packet" to clients advising them of the newfinancing and opening the loan vehicle up to investorparticipation. EIG, which spun out of the Los Angeles-based bond shop TCW in 2011,has $13 billion of assets under management. In the latest $450 million financing, EIG secured as collateral allthe assets of Pelican Energy LLC. These include McClendon'sinterests in wells Chesapeake might drill in 2013 and the firsthalf of 2014. The EIG financing to Pelican will be used to enableMcClendon to continue in the Chesapeake well program through June2014. For years, McClendon used companies he controls, includingLarchmont, Jamestown and Arcadia Resources LP, to hold his stakesin the Chesapeake wells. EIG funded Larchmont and Jamestown at $375 million and $500million, respectively. EIG did not lend any money to Arcadia, whichborrowed as much as $225 million in 2009. The investors in the EIG funds that lent to McClendon include U.S.public pension funds, foundations and wealthy investors in Europeand Australia. In his April 23 letter to clients, Thomas of EIG defended the twoprior loans to McClendon, writing: "The crux of the story as itrelates to EIG seems to be that we got too good a deal for ourinvestors.". We are high quality suppliers, our products such as China Reinforced Cord , Screen Printing Squeegee Manufacturer for oversee buyer. To know more, please visits Reinforced Cord.
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