Wall Street Journal 5/11/93
Prudential To Sell 35 Energy Partnerships

NEW YORK - Prudential Securities Inc. is on the verge of closing a chapter in its costly foray into oil and gas partnerships. The Prudential Insurance Co. of America until agreed to sell 35 troubled oil and gas partnerships to Parker & Parsley Petroleum Co. for $557 million. Of that amount, parker & Parsley, a Midland, Texas independent oil and gas company, said it will offer cash of $448.3 million to the more than 120,000 investors who bought interests in the energy-income partnerships sponsored by Prudential.

If accepted by the partnerships, parker & Parsley's cash tender would mean that investors in Prudential's energy income partnerships would effectively receive 76 cents on the dollar for their original $1.45 billion investment. That includes about $655 million that Prudential Securities already has paid out in distributions to the energy partnerships investors; the cash tender would bring the amount paid out to about $1.1 billion.

Other Offers

Prudential Securities was one of the biggest sellers of limited partnerships in the 1980s; many of the partnerships sold by Wall Street firms have soured and triggered lawsuits by investors. The partnership investments were hurt by tax-law changes and a slump in the energy industry, among other problems.

Parker & Parsley's bid topped several rival offers for the partnership assets. Among them: a $500 million offer by Torchmark Corp., Birmingham, Ala., and a revised $283 million offer by GBK Acquisition Corp., Tulsa, Okla. Torchmark said it wouldn't raise its offer, and will back out of the bidding; BGK declined to comment. But the proposed sale, which could be completed as early as August, still leaves Prudential Securities with significant partnership headaches. Prudential, the nation's fourth-largest brokerage firm, faces investigations by the Securities and Exchange Commission and state securities regulators into whether the firm improperly sold the partnerships, people familiar with the inquiries said.

Moreover, the sale agreement doesn't affect a class-action lawsuit against Prudential filed in a New Orleans federal court on behalf of the 120,000 energy-income partnership investors. The suit says the investors lost about half of the 1.4 billion they put into energy partnerships sold by the firm - then known as Prudential-Bache Securities Inc. between 1983 and 1990.

Settlement Offer

Late last year, Prudential Securities offered investors a settlement that included about $37 million in cash payments and interests in the partnerships in a reorganized form. But a federal judge in the case said in February that he had "serious reservations" about the fairness of the settlement.

Now Prudential Securities will withdraw the settlement offer and submit a revised proposal, which probably would include more cash for investors, people familiar with the matter said. A Prudential Securities spokesman would only say: "We will be reconsidering the terms of the settlement and would be in discussions with plaintiffs' attorneys on that in the near future".

While the sale agreement is good news for investors, "It still doesn't adequately compensate people for their loss," says Robert H. Rex of Dickenson Murdoch Rex and Sloan, a Boca Raton, Fla. law firm that represents energy-partnership investors with claims again Prudential. That's because even if investors received all the money they put into the partnerships, they still lost the interest they would have earned during the time they owned the partnership, Mr. Rex  says.

Nevertheless the deal is beneficial for investors who want some of their money soon, some lawyers said. "It's far and away the best deal I've seen come down and deserves serious consideration" by investors says J. Boyd Page of Page & Bacek, an Atlanta law firm that is among several firms representing plaintiffs suing Prudential over the partnerships. "The big challenge for Pru now is to improve its settlement" in the big class action case, says Clinton A. Krislov of Krislov & Associates, a Chicago law firm that also is representing clients with claims against Prudential…