Prudential Changes Its Stance on Funds
Reversing its stand of the last two years, Prudential Securities said Monday that it will invite bidders to make offers for a series of oil and gas limited partnership holdings that are at the center of an intense legal battle.
At the same time, Prudential said it advised the 137,000 investors who hold the partnership interests to reject a $173.5-million tender offer begun last week by Oklahoma oil man George B. Kaiser.
The partnerships, known collectively as the Energy Income Funds, were heavily marketed by Prudential to retirees and other small investors in the 1980s. Investors poured in about $1.3 billion, and many have lost all or nearly all of their money. Prudential and a New Orleans firm that managed the partnerships have been accused in lawsuits and arbitration claims of massive fraud in marketing and managing the partnerships. Prudential, a unit of Prudential Insurance, has denied any wrongdoing.
In a statement, Prudential said it “will be inviting third parties to review internal partnership information and to make proposals which would provide superior value for the limited partners.” The firm cautioned, however, that there was no assurance any offers will materialize.
In a filing with the Securities and Exchange Commission, Prudential said it is considering either a sale of the partnerships’ oil and gas assets, or tender offers for the limited partnership units. Prudential had been on the verge of concluding a class-action settlement with most of the partnership investors that would have paid them only a few cents on the dollar for their losses. But the offer was blocked in February by a federal judge in New Orleans who said he had serious concerns about its fairness.
Prudential previously had said it wouldn’t solicit any offers for partnership assets until after the settlement had gone through and the partnerships were reorganized into a new corporation.
Prudential said it recommended rejection of the Kaiser offer because the price was inadequate. It would have paid investors substantially more than they would have received under the class-action settlement, but still only a fraction of what they had originally paid for the partnership interests.
Kaiser responded with a statement casting doubt on whether Prudential will seriously solicit higher bids.
However, Clint Krislov, a lawyer who opposes the class-action settlement, said he welcomes Prudential’s decision to invite bids. “It’s my hope we can work out a real settlement for these people and get them a meaningful return on their investments,” he said.
