Occidental Petroleum Corp has been sued by investors who claim they suffered billions of dollars of losses because the heavily indebted company concealed its inability to weather plunging oil prices, after paying $35.7 billion to acquire Anadarko Petroleum Corp.
The proposed securities class action was filed late Tuesday in a New York state court in Manhattan on behalf of former Anadarko shareholders who swapped their stock for Occidental shares, and investors who acquired $24.5 billion of Occidental bonds that helped fund the August 2019 merger.
Investors said Occidental should have disclosed in its stock and bond registration statements how quadrupling its debt load to $40 billion would leave it “precariously exposed” to falling oil prices, and undermine its ability to boost shale oil production and its common stock dividend.
The investors also said Houston-based Occidental’s issuance of $10 billion of preferred stock to Warren Buffett’s Berkshire Hathaway Inc compounded the overleveraging.
As of Tuesday, Occidental’s market value had dropped to $13 billion from about $44 billion when the merger closed. Some of Occidental’s new bonds traded at between 60 and 90.5 cents on the dollar.
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