ETN Tag Archives — Securities Lawyers Blog

Investor Recovery Options for Goldman Sachs MLP and Energy Renaissance Fund (GER) Losses

February 4, 2016 | by Staff Attorney

The investment fraud attorneys with Gana Weinstein LLP continue investigate oil and gas and commodities related investment losses. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. Goldman Sachs MLP and Energy Renaissance Fund (Ticker Symbol: GER) is a Master Limited Partnership (MLP) closed-end mutual fund. The Fund opened at about $20 per share in September 2014. However, since that time, due to the fund’s holdings in MLPs, the value for the fund has plummeted to $4.19 representing an almost 80% loss.

About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. According to Bloomberg, many oil companies are in trouble and are going bankrupt as U.S. high-yield debt issued to junk-rated energy companies grew four-fold to $208 billion. The bankruptcies have been devastating causing forced selling at fire sale prices.

Moreover, our firm has been receiving an alarming number of complaints concerning how these speculative investments are being marketed and sold to investors. Often times these products are pitched as ways to ride the boom in U.S. oil and gas production and receive steady streams of income. However, in the past year, investors have lost $20 billion in publicly traded in master limited partnerships and publicly traded oil funds. This amounts to an astonishing $8 of every $10 they had invested, according to a report prepared for The Associated Press article. The research does not include losses from $37 billion of bonds sold by the partnerships in the five years since 2010 or losses from private placement partnerships. However, banks like Citigroup, Barclays, and Wells Fargo made an estimated $1.1 billion in fees for selling these products to investors.

Commodities Company Freeport-McMoran (FCX) Investors Suffer Massive Losses

January 28, 2016 | by Staff Attorney

The law offices of Gana Weinstein LLP continue to report on investor related losses and potential legal remedies due to recommendations to investor in oil and gas and commodities related investments. Commodity prices have plummeted due to the economic slowdown in China and the strengthening dollar. Persistently low equity prices for companies in these sectors are ruining balance sheets prompting bankruptcies and debt reduction strategies that may be too little too late.

One such company is Freeport-McMoran (FCX). Analysts studying Freeport worry about lower projected copper prices, risks in Indonesia, and the company’s reluctance to sell assets to raise capital. According to analysts it may already be too late for Freeport. So far the company has taken some steps such as announcing suspending its dividend and reducing capital expenditures. However, the Arizona-based natural resources company has a $20 billion debt load and no meaningfully way to reduce it. Shares of Freeport which traded as high as $38 in 2014 now trade at $4.35 a share.

Before recommending investments in oil and gas and commodities related investments, brokers and advisors must ensure that the investment is appropriate for the investor and conduct due diligence on the company in order to understand the risks and prospects of the company. Oil and gas and commodities related investments have been recommended by brokers under the assumption that commodities prices would continue to go up. However, brokers who sell oil and gas and commodities products are obligated to understand the risks of these investments and convey them to clients.

UBS Closes Two MLP ETNs – ETRACS 2x Monthly Leveraged S&P MLP Index (MLPV) and ETRACS 2x Monthly Leveraged Long Alerian MLP Infrastructure ETN (MLPL) After Massive Investor Losses

January 24, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating investors that were recommended to invest in two UBS exchange traded notes (ETNs) that concentrated in master limited partnerships (MLPs) that are now being shuttered. The first ETN, ETRACS 2x Monthly Leveraged S&P MLP Index ETN (MLPV) only recently was issued in July 2015 and is an $11 million fund. Since starting at a high of around $21 per share the fund has collapsed to only around $6.6 per share. The other fund being closed is the $113 million ETRACS 2x Monthly Leveraged Long Alerian MLP Infrastructure ETN (MLPL) which reached a high of around $73 in July 2014 only to fall to about $12.6. According to a press release by UBS the funds “will be mandatorily redeemed in accordance with the terms of the Securities as a result of the occurrence of an Acceleration Event, triggered as a result of the intraday indicative value of the Securities being equal to or less than $5.00 on January 20, 2016.”

The liquidation of a $113 million fund like MLPL under these circumstances is shocking. The notes were supposed to expire by the earliest in 2040. However, the rapid fall of the price of oil triggered an acceleration provision. Investors recommended to hold such funds by their advisors were probably not aware that the funds could be required to automatically liquidate their holdings under duress and at firesale prices that will erase shareholder value. The liquidation provisions in the ETNs is a risk that financial advisors may not be aware of when they recommend buying and holding this speculative asset class that offers leveraged exposure to a volatile commodity like oil. Further, at this point it would take a mathematician to figure out what an investor is likely to receive in repayment.

Our firm is investigating potential securities claims against brokerage firms over sales practices related to the recommendations of oil & gas and commodities products such as exchange traded notes (ETNs), structured notes, private placements, leveraged ETFs, mutual funds, and individual stocks. Our firm has written numerous articles concerning the dangers of MLP investments. MLPs are publicly traded partnerships. About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. However, most of these companies are heavily reliant on high oil prices to sustain their business models.

Wells Fargo Financial Advisor Charles Lynch Accused of Unsuitable Energy Related Investments

January 24, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating a number of customer complaints involving Wells Fargo Advisors, LLC (Wells Fargo) brokers, including financial advisor Charles Lynch (Lynch), concerning allegations that the investors have been recommended or their advisory accounts have been mismanaged to hold high concentrations of energy related investments. According to Lynch’s publicly available records, there are 11 customer complaints with 9 of those complaints being filed in 2015 all related to energy investments. The customer complaints against Lynch allege securities law violations that including unsuitable investments among other claims.

Our firm is investigating potential securities claims against brokerage firms over sales practices related to the recommendations of oil & gas and commodities products such as exchange traded notes (ETNs), structured notes, private placements, master limited partnerships (MLPs), leveraged ETFs, mutual funds, and individual stocks. Our firm has written numerous articles concerning the dangers of MLP investments. MLPs are publicly traded partnerships. About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. However, most of these companies are heavily reliant on high oil prices to sustain their business models.

Before recommending investments in oil and gas and commodities related investments, brokers and advisors must ensure that the investment is appropriate for the investor and conduct due diligence on the company in order to understand the risks and prospects of the company. Many of these companies relied upon high energy prices in order to sustain their operations. As reported by the Wall Street Journal the drop in oil and energy prices and the industry downturn has made it difficult for many companies to refinance their debts.

Hercules Offshore Investor Recovery Options

January 10, 2016 | by Staff Attorney

According to Bloomberg, Hercules Offshore Inc., (Hercules Offshore) is the owner of the largest fleet of shallow-water drilling rigs in the Gulf of Mexico when it filed for bankruptcy in August 2015. Debt issues by Hercules Offshore and drilling rig provider Paragon Offshore were among the worst-performing oil and gas service bonds in the high-yield energy index.

The company plans to use the bankruptcy to cut $1.2 billion in debt and for investors to trade their senior notes for almost 97 percent of Hercules’s equity. In addition, noteholders would also lend the company $450 million to finish building a new oil-drilling rig. Meanwhile, the number of rigs operating in the Gulf of Mexico has fallen by more than half from last year’s high of 63 by August 2015.

Oil and gas and commodities related investments have been recommended by brokers under the assumption that commodities prices would continue to go up. Some experts are saying that if production volume continues to be as high as it currently is and demand growth weak that the return to $100 a barrel is years away.

Samson Resources Investor Recovery Options

January 9, 2016 | by Staff Attorney

The investment attorneys at Gana Weinstein LLP continue to report on investor losses in oil and gas related investments. Our firm is investigating potential securities claims against brokerage firms over sales practices related to the recommendations of oil & gas and commodities products such as exchange traded notes (ETNs), structured notes, private placements, master limited partnerships (MLPs), leveraged ETFs, mutual funds, bonds, and individual stocks.

The fall of Samson Resources Corp. (Samson Resources) has been called a Wall Street blooper by and editorial in the Wall Street Journal. As a background, private equity firm KKR (Stock Symbol NYSE:KKR) announced the purchase of oil and gas producer Samson Investment Company’s onshore US assets in a 2011 deal worth $7.2 billion. The acquisition occurred when oil prices were near $100 per barrel and small independent shale oil producers were being acquired with PE ratios often above 50 but little to no positive cash flow to show that would justify the valuations. Now four years later and Samson Resources, under KKR’s ownership, has filed for bankruptcy and is currently undergoing restructuring. The August 2015 bankruptcy announcement precipitated a drop in KKR’s stock price of nearly 40%.

Billions of dollars from investors pumped into Samson Resources evaporated with the chapter 11 bankruptcy filing. The company’s planned reorganization intends to wipe out the $7.2 billion invested by KKR and others in a 2011 leveraged buyout. The plan would also nearly erase Samson’s $2.25 billion in bond debt held by Blackstone Group. The continued failure of oil price recovery has reduced credit traders’ view of Samson Resource’s prospects for emerging from bankruptcy as a profitable company.

Atlas Energy Group Investors May Have Suitability Claims to Recover Investment Losses

December 22, 2015 | by Staff Attorney

Atlas Energy Group (NYSE:ATLS) is the general partner of Atlas Resource Partners (NYSE:ARP), a sponsor of oil and gas private placements and investments. The investment attorneys at Gana Weinstein LLP continue to report on investor losses in oil and gas related investments, like Atlas.

Atlas Energy Group and Atlas Resource Partners stock have both completely collapsed recently with both losing over 95% of their value over the past 2 years. Trying to unravel the business of the Atlas entities is nearly impossible. Even Atlas’ website fails to provide any meaningful understanding as to the business.

The website states that the business of Atlas Energy involves the ownership of: 1) 100% general partner interest and incentive distribution rights of Atlas Resource Partners, LP an exploration and production MLP; 2) 25 million ARP units, which includes ~21 million common units and 3.75 million Class C Preferred units in ARP; 3) 80% general partner interest and incentive distribution rights, as well as an 8% limited partner interest in Atlas Energy’s E&P Development Subsidiary; 4) 16% general partner interest and 12% limited partner interest in Lightfoot Capital Partners, which has a 40% limited partner interest in Arc Logistics Partners LP (NYSE: ARCX), an independent U.S.-based energy logistics service provider. Did this description clarify things?

Oil and Gas Private Placement Losses: Investigation of Reef Oil and Gas Companies

December 21, 2015 | by Staff Attorney

Reef Oil and Gas Companies located in Richardson, Texas, is a sponsor of oil and gas private placements and investments. The investment attorneys at Gana Weinstein LLP continue to report on investor losses in oil and gas related investments, like Reef Oil and Gas.

Investors often do not appreciate the risks when investing in oil and gas private placements. Even before the collapse of oil prices it was rare for investors to make money on oil deals. According to Reuters, of 34 deals Reef Oil and Gas has issued since 1996, only 12 have paid out more cash to investors than they initially contributed. Reuters also found that Reef sold an additional 31 smaller deals between 1996 and 2010 taking $146 million from investors and only paying out just $55 million.

If investments in oil and gas private placements rarely succeed during oil booms, then they will certainly fail under current market conditions. According to Bloomberg, many oil companies are in trouble as U.S. high-yield debt issued to junk-rated energy companies grew four-fold to $208 billion. Most of these companies are now struggling to stay afloat with oil prices at $45. Many of these companies relied upon high energy prices in order to sustain their operations. As reported by the Wall Street Journal the drop in oil and energy prices and the industry downturn has made it difficult for many companies to refinance their debts.

Oil and Gas Bankruptcy List Expands Along with Investor Losses

December 4, 2015 | by Staff Attorney

The investment attorneys at Gana Weinstein LLP continue to report on investor losses in oil and gas related investments. Our firm is investigating potential securities claims against brokerage firms over sales practices related to the recommendations of oil & gas and commodities products such as exchange traded notes (ETNs), structured notes, private placements, master limited partnerships (MLPs), leveraged ETFs, mutual funds, and individual stocks. See Oil and Gas Investments – What Remedies Do Investors Have?; Overconcentrated in Oil and Gas Investments?; Oil and Gas Investments – Issuers Profit While Investors Take All the Risk; Atlas Energy Oil and Gas Investments: A Risky Proposition Part I; Gana Weinstein LLP Investigates Investor Losses Tied to Oil and Commodities Linked ETNs; Gana Weinstein LLP Investigates Investor Losses In Oil-Linked Structured Notes

According to a recent news article tracking oil and gas bankruptcies the pain in the industry is expected to continue. Nearly two dozen oil and gas companies have gone bankrupt in the past year including RAAM Global Energy Co., Endeavour International Corp. (ENDRQ), Quicksilver Resources Inc. (KWKAQ), Sabine Oil & Gas Corp. (SOGCQ), Hercules Offshore Inc. (HEROQ), Cal Dive International Inc. (CDVIQ), Dune Energy Inc. (DUNRQ), BPZ Resources Inc. (BPZRQ), ERG Intermediate Holdings LLC, American Eagle Energy Corp. (AMZGQ), Saratoga Resources Inc. (SARAQ), Milagro Oil & Gas Inc., and Miller Energy Resources Inc. (MILLQ). Canadian companies that entered bankruptcy include Verity Energy Ltd., Gasfrac Energy Services Inc., Southern Pacific Resource Corp., Laricina Energy Ltd., and Shoreline Energy Corp.

Not only have oil and gas companies gone bankrupt but companies that provide services to oil and gas companies have also been effected including A&B Valve and Piping Systems LLC, CCNG Energy Partners LP, and Boomerang Tube LLC.