Hunts Seek to Save Empire, Put Oil Firm in Bankruptcy
The Hunt brothers of Dallas, trying to keep their empire from crumbling in the wake of the collapse of oil prices, Friday put a cornerstone of their fortune under protection of the bankruptcy court.
The Hunts, whose legacy from their father, legendary wildcatter H.L. Hunt, was once valued at $6 billion, acted just in time to head off a scheduled foreclosure sale Friday of some of their oil and gas properties in Mississippi.
The Hunts’ troubles have been deepening for more than five years, since they failed in an attempt to corner the world silver market. But their bankruptcy action Friday was viewed as a spectacular example of the economic woes now afflicting the nation’s oil producers.
The voluntary petition under Chapter 11 of the bankruptcy code, filed in U.S. District Court in New Orleans, effectively blocks the attempted seizure by 23 banks of Hunt property pledged as collateral for $770 million in defaulted loans to the family’s Placid Oil Co. and a real estate subsidiary. (Under Chapter 11, a business is given time to reorganize and formulate a plan to pay off its debts without the threat of foreclosure by its creditors.)
However, nearly 300 acres of prime Texas real estate owned by a Hunt trust remained unprotected late Friday, and that land is still scheduled to be auctioned Tuesday on the steps of the county courthouse in downtown Dallas.
The bankruptcy filing will prevent the seizure of, among other properties, the 50-story Thanksgiving Tower in downtown Dallas that is headquarters for various Hunt enterprises. The struggle over the tower illustrates the bitterness that permeates the long dispute with the Hunts’ lenders.
The banks singled out Thanksgiving Tower for foreclosure “with an eye toward maximizing the public embarrassment” of the Hunts, for whom “a legacy and pride exists about that building,” a family spokesman complained Friday.
The lead lenders in the consortium, Manufacturers Hanover Trust of New York and RepublicBank of Dallas, refused to comment on the bankruptcy filing. But their lawyers have indicated that they would move to foreclose on additional properties, and one bank attorney said Friday that the lenders are “simply interested in collecting the debts and will do whatever is appropriate.”
More Bankruptcies Seen
That appears to signal additional bankruptcy filings for other Hunt entities to protect more properties from seizure.
The move on behalf of Placid Oil and the real estate subsidiary was the latest in what has become a six-year struggle to prevent the Hunts’ private fortune, estimated at more than $6 billion before the silver debacle, from unraveling.
Since the Hunts lost more than $1 billion in their silver-buying spree in 1980, their oil empire--consisting mainly of Placid Oil and Penrod Drilling, among the world’s biggest independent producers and drillers--has been devastated by the long slide in world oil prices, which accelerated dramatically last November.
Placid and Penrod are owned by trusts for Lamar, William Herbert and Nelson Bunker Hunt, sons of wildcatter H.L. Hunt, who died in 1974. The spokesman for the Hunts, Keith Burton of Gray & Co., a public relations firm in Dallas, said the brothers might have to seek bankruptcy protection for Penrod Drilling if the banks seek to foreclose on collateral for loans to that company.
Assets Exceed Liabilities
The bankruptcy petition for Placid Oil listed more assets, about $2 billion, than liabilities, $980 million. But the Hunts said the bankruptcy filing was necessary because the seizure of the assets, including a gas-processing plant that the Hunts called critical to the operations of Placid Oil, would “cause irreparable injury.”
The bankruptcy action was “forced on us by the banks so we can have our day in court,” said Dan Brown, president of Placid.
He was referring to the Hunts’ legal fight against the 23 banks, started this summer in the form of two lawsuits against the banks seeking $15 billion in damages. The Hunts alleged that the banks were engaged in a conspiracy to undermine their empire, a contention the banks have dismissed as a stalling tactic in the wake of defaults last spring on about $1.5 billion in loans.
The lawsuits against the banks, as well as a lenders’ countersuit, are proceeding through the federal court in Dallas. Banks named as defendants include California-based Security Pacific, First Interstate, Crocker and Bank of America.
The lenders issued foreclosure notices earlier this month, adding to what has become a flood of property seizures in Dallas and other oil patch cities damaged by the halving of world oil prices.
Judge Denies Request
The bankruptcy petition became almost a foregone conclusion Wednesday when U.S. District Judge Barefoot Sanders in Dallas rejected the Hunts’ request to block the foreclosure actions. The petition was filed hours before a scheduled auction of properties in four Mississippi counties.
Placid’s Brown said the company filed its petition in New Orleans because most of its assets and employees are in or offshore of Louisiana.
Brown said the bankruptcy action puts Placid “in a position . . . to operate our business as usual and to repay all of our loans with interest. At the same time, we will be able to build, rather than see destroyed, the considerable assets of Placid.”
He said Placid has a present value of “more than $1 billion” and is currently paying suppliers on time.
The lawsuits, and now the bankruptcy filing, are slowly lifting the veil of secrecy from the Hunts’ private holdings. And the financial crisis threatens to whittle away at not only corporate assets but the family fortune as well. Those properties have ranged from farms and ranches in the Midwest to the Kansas City Chiefs football team, owned by Lamar Hunt.
Debt Tied to Silver Fiasco
In the wake of the silver disaster, the Hunts took on the $1.5 billion in debt that is now the focus of the lawsuits and foreclosure actions. In recent years, the empire has been forced to sell agricultural equipment and other properties to pay its bills. A Hunt sugar-beet operation went bankrupt last year.
According to the Hunt lawsuit against the banks, the oil and gas reserves of Placid Oil alone were worth $1.96 billion in June, 1983. But the oil price collapse since last winter would have slashed their paper value to the $1-billion range.
In its latest listing of the 400 richest Americans, Forbes magazine estimated that Nelson and Herbert Hunt had dropped below $1 billion each in individual net worth--Nelson to $900 million and Herbert to $800 million. Lamar’s net worth was put at more than $500 million.
Unless the Hunts act over the weekend to protect it, Dallas County authorities will offer for sale Tuesday morning a 286-acre tract along the Central Expressway in Richardson, a Dallas suburb. The tract is owned by a Hunt trust.
Meanwhile, a bank affidavit filed in court last week said interest on the Hunts’ loans is accruing at a rate of $230,461 a day.
