Investigating Potential Claims in LRR Energy LP and Vanguard Natural Resources
Have you suffered losses investing in LRR Energy LP or Vanguard Natural Resources? If so, the securities attorneys at The White Law Group may be able to help you recover your losses by filing a FINRA arbitration claim against the brokerage firm that sold you the investment.
LRR Energy, L.P., through its subsidiary, LRE Operating, LLC, operates, acquires, exploits, and develops producing oil and natural gas properties in North America. It holds interests in various properties located in the Permian Basin region in west Texas and southeast New Mexico; the Mid-Continent region in Oklahoma and east Texas; and the Gulf Coast region in Texas. As of October 5, 2015, LRR Energy, L.P. operates as a subsidiary of Vanguard Natural Resources, LLC.
LRR Energy LP Merges with Vanguard Natural Resources
The deal, announced in April 2015 and approved by shareholders of both companies in October, saw Vanguard Natural Resources acquire LRR Energy and general partner LRE GP LLC in exchange for $251 million in Vanguard common units, merging one of its subsidiaries into LRR Energy.
The deal included Vanguard picking up LRE’s net debt of $288 million and valued LRR Energy at $8.93 per common unit based on Vanguard’s closing price on April 20, 2015, representing a 19 percent premium on LRR Energy’s volume-weighted average price at that time.
Class Action Lawsuit
Unfortunately for investors the deal didn’t turn out to be as sweet a deal as they anticipated. A shareholder class action led by Robert Hurwitz alleged the proxy and registration statements detailing the proposed merger did not disclose that debt servicing issues would significantly reduce distributions to shareholders.
Vanguard Natural Resources may have misled shareholders by neglecting to disclose a cut to shareholder distributions to pay down debt associated with its acquisition of LRR Energy, a federal judge ruled in March.
After the merger closed in November 2015, Vanguard told shareholders that it would be reducing distributions from an annual $1.41 per share to $0.36 per share, a 75 percent reduction in cash distributions that the company claimed would instead be directed to paying down its debt. Four months later, Vanguard suspended all cash distributions citing the same reasons.
The plaintiff, Hurwitz claimed the cuts took a toll on Vanguard’s share price, which fell from $14.69 per share in November 2015 to $3.23 per share in March 2016. Vanguard’s share price is now trading at $.30/share.
U.S. District Judge Sue Robinson denied Vanguard’s motion to dismiss the action on March 13.
Recovery of Investment Losses
The White Law Group continues to investigate whether some brokerage firms may have improperly recommended high-risk MLPs like Vanguard Natural Resources to clients. Unfortunately, many investors were not made adequately aware of the risks associated with energy investments like Vanguard Natural Resources or LRR Energy LP.
Before recommending an investment, your broker has a fiduciary duty to adequately disclose the risks involved in the investment and to perform the necessary due diligence to determine whether the investment is suitable for the investor.
To the extent that some brokerage firm failed to perform adequate due diligence or make unsuitable investment recommendations, the firm may be held liable for any resulting losses in a FINRA arbitration claim.
To determine whether you may be able to recover investment losses incurred in Vanguard Natural Resources or LRR Energy LP, please contact The White Law Group at 1-888-637-5510 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida. For more information on the firm, visitwww.WhiteSecuritiesLaw.com.