Main Street Natural Gas Bonds

The September 2008 bankruptcy filing of Lehman Brothers Holdings is unlikely to fade from the memory of investors anytime soon. That’s because the bankruptcy had a ripple effect on other investments tied to Lehman, including investments in Main Street Natural Gas Bonds.

Main Street Natural Gas Bonds were marketed and sold by many Wall Street brokerages as safe, conservative municipal bonds. Instead, the bonds were complex derivative securities backed by Lehman Brothers. When Lehman filed for bankruptcy protection in September 2008, the trading values of the Main Street Bonds plummeted.

Many investors who put their money in Main Street Natural Gas Bonds allege that the brokers in question never disclosed all of the risks associated with the bonds nor did they reveal the fact that the bonds were connected to the financial health of Lehman Brothers.

If you were sold Main Street Natural Gas Bonds as a safe, low-risk investment, you may have a viable claim for recovery. Please contact our firm to tell us your story.

Main Street Natural Gas Bonds have proven to be an investor’s worst nightmare after they became subject to the bankruptcy of Lehman Brothers Holdings.

Marketed and sold by a number of brokerages as safe, conservative municipal bonds, Main Street Natural Gas Bonds actually were complex derivative securities backed by Lehman Brothers. When Lehman filed for bankruptcy protection in September 2008, the trading values of the Main Street bonds plummeted.

Many investors who put their money in Main Street Natural Gas Bonds have come forth with claims alleging they were never told that the viability of the Main Street investments was dependent on the viability of Lehman Brothers’ fiscal health. Investors didn’t know because they never received a prospectus on the bonds nor did their broker reveal the Lehman Brothers connection.

When a broker recommends an investment on behalf of a client, he has a legal obligation to adhere to that client’s specific investing objectives and risk tolerance levels. When this doesn’t happen, the broker has failed to uphold his fiduciary and due diligence duties.

If you were told Main Street Natural Gas Bonds were safe, low-risk municipal bonds, you may have a claim against the brokerage firm that sold the investment. Please contact our firm to tell your story.

As everyone knows by now, the meltdown on Wall Street has affected Main Street in unexpected, unusual and unprecedented ways. Consider the enchanting world of Walt Disney’s Magic Kingdom. As reported a year ago by USA Today, the natural gas that cooks the food in Disney’s Magic Kingdom - and elsewhere throughout America’s Main Street - was one of the things that Wall Street bought and sold to investors as safe, low-risk investments.

On Sept. 15, that natural gas deal - known as the Main Street Natural Gas bonds - went bust, plummeting in value after Lehman Brothers Holdings, which had guaranteed the bonds, filed for bankruptcy protection. Investors and consumers subsequently found themselves reeling from the fallout. Investors were out $700 million and places like Disney World experienced higher prices to cook the food for the visitors to its Magic Kingdom.

Main Street Natural Gas is a non-profit corporation of the Municipal Gas Authority of Georgia. In 2006, several Wall Street investment firms came up with the idea to get the Authority to lock in, for presumably decades, inexpensive supplies of natural gas. The idea was simple: Borrow money at low, tax-exempt interest rates and provide that money to the investment banks. Wall Street would then use that debt to make investments and, in turn, supply natural gas at low prices.

The investments made by Main Street included natural-gas derivatives - contracts that bet on the cost of natural gas in the future. In April, Main Street borrowed $700 million, giving it to Lehman Brothers. In return, Lehman promised to arrange delivery of nearly 200 billion cubic feet of natural gas over 30 years at a below-market price.

“That’s like a taxi driver borrowing $7,000 and giving it to a man who promises to supply gasoline for the next 30 years at 50 cents per gallon less than the market price,” said the USA Today article.

The savings associated with such a deal would be nothing to sneeze at - that is if the company holding all the money stayed in business. Lehman Brothers Holdings filed for bankruptcy on Sept. 15. At the time, less than 1% of the natural gas it promised to deliver actually made it.

As for the $700 million, it went the way of Lehman’s other assets: into a pool of money allocated to repay creditors. In other words, Main Street Natural Gas’ lenders must wait in line with countless other unsecured creditors. If they’re lucky, the lenders might get 30% of what they are owed. And the bonds they purchased to finance the natural-gas deal in the first place? They now sell for pennies on the dollar.

The brokerage firms that sold Main Street Natural Gas Bonds to investors never let on about the significant risks associated with the investments nor did they disclose critical information about the deteriorating fiscal health of Lehman Brothers and its toxic mortgage debt exposure.

If you own or owned Main Street Natural Gas Bonds guaranteed by Lehman Brothers Holdings, you may have a viable claim to recover any investment losses you suffered following Lehman’s bankruptcy. Please contact our firm to tell us your story.

Preferred stock losses in Fannie Mae, Freddie Mac, Lehman Brothers, and other fiscally troubled companies have cost investors dearly over the past two years. Preferred shares generally are considered more conservative, low-risk - investments especially attractive to retirees seeking predictable income via dividends. In many cases, however, the supposedly “low-risk” preferred stocks sold to investors turned out to be highly volatile because of the financial health of the issuing companies.

Many investors had been told by their brokerages and financial advisers that preferred stocks were a safe and secure investment. As a result, they purchased large concentrations ofcertain preferreds, including those like Fannie Mae and Freddie Mac. In the case of the nation’s two biggest mortgage lenders, investors believed they had built-in protection. If either company failed, their investment principal would fall under the protection of the federal government.

Or so they thought.  It didn’t turn out that way, of course. When the government placed the two companies into conservatorship, investors holding preferred and common shares were essentially wiped out, leaving them with huge financial losses and not the “safe” and “predictable” income they had been told to expect.

If you’ve experienced substantial investment losses because a brokerage or financial advisor misrepresented the risks of Freddie Mac, Fannie Mae or other preferred stocks, please contact us. We can advise you regarding your legal options.

UBS AG faces dozens of arbitration claims from U.S. clients who bought 100 percent principal protected notes issued by Lehman Brothers Holdings that turned out to be virtually worthless after the company filed for bankruptcy in September. Now, in one of the first cases to be heard by the Financial Industry Regulatory Authority (FINRA), an arbitration panel has awarded an investor $200,000, ruling that her UBS broker inappropriately sold her the risky investments.

As reported Dec. 5 by the Wall Street Journal, the case serves as one of the first that FINRA has ruled upon concerning Lehman principal protected notes and could be a sign of how future cases may unfold.

Steven Caruso, an attorney with Maddox Hargett & Caruso, said in the article that hundreds or thousands of additional arbitration cases are expected to be filed in connection with Lehman principal protected notes. Caruso’s firm alone will represent roughly 100, according to the Wall Street Journal.

Lehman principal protected notes were structured notes that many banks and securities firms represented as low-risk investments. What they failed to emphasize to investors was the fact that the notes were unsecured obligations of Lehman Brothers. When Lehman filed for bankruptcy on Sept. 15, holders of the notes found themselves with investments that traded for pennies on the dollar.

If you have suffered losses in Lehman principal protected notes and wish to discuss filing an individual arbitration claim with FINRA or have questions about these investments, please contact us.