According to multiple news sources, a private equity fund managed by firm EnerVest Ltd. has lost essentially all of its value. The $1.5 billion EnerVest Energy Institutional Fund XII closed in 2010 while the $2 billion EnerVest Energy Institutional Fund XIII closed in 2013 appear to be affected by the loss. The EnerVest Fund XIII fund raised billions and focused on oil and gas and then borrowed $1.3 billion leveraging up the fund at the height of the oil market. As oil prices declined from more than $100 in 2014 to a low of $26 the value of EnerVest’s assets, which served as collateral on the debt, fell precipitously.
The decline in asset value then triggered repayment demands from lenders that could not be met. EnerVest has its credit facilities with Wells Fargo for its funds. In 2015, after the valuation of EnerVest Fund XII fell, Wells Fargo accelerated EnerVest’s debt repayment to $125 million from $20 million. EnerVest also stated in 2016 that it expected Wells Fargo to require an even larger repayment of Fund XIII in May 2016.
According to sources, investors can expect to be left with at pennies on the dollar. A loss of this scale for a private equity firm of EnerVest’s size is highly unusual given that there are only a handful of private equity firms worth at least $1 billion that have lost money.
Our firm is investigating potential securities claims against 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.
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.
At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.