Chesapeake Energy Corp’s CEO Hid $1.1 Billion in Personal Loans
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UPDATED: Apr 18, 2012
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Aubrey McClendon, the CEO of Chesapeake Energy Corp, reportedly borrowed as much as $1.1 billion in personal loans over the last three years, according to Reuters.
The personal loans were reportedly staked against thousands of Chesapeake Energy’s oil wells, which is something many experts feel is a conflict of interest.
“There are no covenants or obligations in my loan documents or mortgages that bind Chesapeake in any way,” explained McClendon in an email to Reuters.
But the size and terms of these loans is what has some shareholders worried.
Previously hidden from investors, the personal loans funded McClendon’s operating costs to invest in a 2.5 percent interest in every well the company drills. McClendon then turned around and used those 2.5 percent stakes as collateral on the same loans used finance this endeavor. Putting the company’s wells up as collateral is what prompted onlookers to accuse McClendon’s financing deals as a conflict of interest.
Most of the loans were originated by EIG Global Energy Partners, which has had a long history of financing Chesapeake. According to Reuters, EIG has helped Chesapeake raise more than $2 billion through the sale of shares that provided very favorable terms to buyers.
Stationed in Oklahoma City, Oklahoma, Chesapeake Energy Corp is the second largest producer of natural gas in the United States, and is currently the most active oil well driller in the country. Recently, the company suffered a multi-billion dollar crash due to a dip in natural gas prices, which some believe prompted McClendon to pursue these expensive personal loans.
Aubrey McClendon, a Duke University Alumni, co-founded the company in 1989, and was named the highest paid CEO of 2008, with a total annual payout of $112 million.