Aubrey McClendon (C) in the finals seconds against the Los Angeles Lakers in Game 3 of their Western Conference playoff series in Oklahoma City, April 22, 2010.
Reuters/Bill Waugh
(Reuters) This weekend, the Oklahoma City Thunder stands one game away from clinching a surprising spot in the NBA finals.
But away from the roar of fans and the glare of cameras, another battle involving the basketball team is brewing in a probate courtroom in its home city.
At stake is a roughly 20 percent interest in the Thunder held by Aubrey McClendon, the indebted Oklahoma energy magnate who died in a car crash on March 2.
Some of McClendon’s creditors want a say over how the stake will be disposed of by his estate, viewing the basketball team as one of his few assets of value, according to a copy of a transcript from a May 13 hearing in probate court.
The lenders want the stake to be sold for top dollar but fear it will be sold for less than that to McClendon’s wife, Kathleen, because she is family, said a lawyer representing a syndicate of banks led by Wilmington Trust that loaned $465 million to a company McClendon founded in 2013, American Energy Partners LP (AEP).
“We have been advised that Katie McClendon wants to purchase that Thunder interest,” said the attorney, Arthur Hoge, in the court transcript reviewed by Reuters.
“If we have a reason to question a sale, because we don’t think it’s an arm’s length fair market value sale … we should have the right to come address that with the court,” he said.
Attorneys for McClendon’s estate said the creditors were getting ahead of themselves and should not yet be intervening in the probate process. They said the interest in the Thunder was not for sale at this stage, and any sale would need to satisfy qualifications set by the National Basketball Association.
“We certainly don’t want the creditors to think we’re going to overreach them, but the assertion that we could sell the Thunder interest without letting you know is absurd,” Martin Stringer, an attorney for the estate, said in the transcript.
Hoge did not give a value for the Thunder stake at the probate hearing. When reached by Reuters, he declined to comment beyond what was in the public record.
Forbes valued the Thunder at $950 million in January. Reuters was unable to verify that valuation.
Stringer and an attorney for Kathleen McClendon did not return requests for comment.
McClendon co-founded Chesapeake Energy Corp (CHK.N) in 1989 and turned it into the second-largest natural gas driller in the United States before he stepped down as chief executive in 2013.
The U.S. fracking pioneer left behind a web of business interests made up of more than 180 limited liability companies, partnerships and corporations. Low oil and gas prices have pressured the value of many of his assets.
The lenders that bankrolled some of McClendon’s oil and gas businesses said in probate court that they believe his estate is likely insolvent. Besides the $3 million McClendon had in a cash account, the Thunder stake may be his most valuable asset, they said.
Attorneys for McClendon’s estate said the creditors’ assertion that the estate was insolvent was “just incorrect.”
“It depends on commodity prices,” among other factors, Stringer said in the transcript.
The fight over the Thunder stake sets the stage for a highly complex and contentious probate proceeding. Hoge compared it to a bankruptcy, where the court’s chief role is to protect the interest of creditors. He said Wilmington Trust was the most significant creditor in the case.
“This is a most unusual estate,” said judge Richard Kirby, according to the transcript.
The banks that originally backed the $465 million loan to AEP, personally guaranteed by McClendon, include Goldman Sachs, Jefferies & Co, Morgan Stanley and Credit Suisse, according to Thomson Reuters data. Representatives for these banks declined to comment.
Before McClendon, 56, died he had been forced by financial pressures to part with some of his oil and gas interests, one of his best sources of cash. His biggest investor was abandoning him and he had just agreed to settle a legal claim that chipped at his reputation, Reuters reported in March.
McClendon had used his interest in the Thunder to personally guarantee a loan from private investment firm Oaktree Capital Management LP to a subsidiary of AEP, according to a person familiar with the matter.
Beyond the Thunder stake and the minority interests in the AEP spin-off companies, the identities of many of the other assets are not publicly known because the probate court granted the estate a waiver on inventorying and valuing them, according to court records.
The attorneys for McClendon’s estate argued that making the assets public now could hurt the estate, according to the court transcript.