Parker & Parsley Petroleum declared near-total victory Tuesday for its effort to buy troubled Prudential Securities oil and gas partnerships, announcing that investors have tendered enough units for it to acquire 33 of the 35 so-called Energy Income Funds.
Midland, Tex.-based Parker & Parsley said it will complete the acquisition of the 33 limited partnerships in about 45 days and still expects to get enough units to buy the remaining two. It extended until Monday the tendering deadline for those units.
The success of Parker & Parsley's $491-million cash offer is a milestone in a process that seems certain to get former Prudential customers much more of their money back than the brokerage firm originally offered them.
Under a proposed class-action settlement derailed by a federal judge in February, Prudential had proposed to pay investors only about $30 million in cash, plus stock in a company not yet formed.
Prudential still faces major civil lawsuits and civil and criminal investigations into charges that the brokerage, formerly Prudential-Bache, defrauded customers in selling the partnership units. The company denies any wrongdoing.
About 137,000 people--mainly retirees and other small investors--put $1.45 billion into the Energy Income Funds in the 1980s. So far they have received back only about $650 million--less than half the original total.
With the Parker & Parsley acquisition, the investors will still be out some $330 million, not counting additional hundreds of millions of dollars they might have earned by putting their money elsewhere.
To complete the acquisition, Parker & Parsley needed at least 50% of the units of each partnership. For some of the 33 partnerships, it received slightly more than 50%; for others, tenders approached 70%, said Herbert C. Williamson III, executive vice president. Investors who did not tender their units in the 33 partnerships now have little choice but to turn them in; they will be paid the same price as those who already tendered their units.
Prudential spokesman William J. Ahearn said the brokerage is "pleased that (the Parker & Parsley offer) is progressing." He added, "It shows that we are aggressively trying to maximize value for partnership holders."
Next, Prudential Securities is expected to come up with a new proposal for settling a class-action suit on behalf of most of the 137,000 investors that is pending in federal court in New Orleans. The success of the Parker & Parsley offer takes some of the financial pressure off the brokerage firm: By getting investors more of their money back, Prudential reduces its exposure in the lawsuits.
But Richard Bell, an investors' lawyer in Indianapolis, said attorneys are still expected to hold out for "much more" than the $100 million Prudential was rumored to be willing to offer a few weeks ago.
Ahearn confirmed that a new settlement offer is in the works, but he would not comment on the amount.