HOUSTON Southeastern Asset Management Inc, Chesapeake Energy Corp's (CHK.N) largest shareholder, cast doubt on the leadership issues that have dogged the natural gas company and said its new board is fully committed to shareholders.
Chesapeake's chief executive, Aubrey McClendon, has been under fire following Reuters reports that he personally borrowed more than $1 billion from a big lender to the company and may have colluded with a competitor to keep land prices low, among other things.
"All of the leadership controversy is now moot," Southeastern CEO Mason Hawkins wrote in his quarterly letter to shareholders. "We go forward at Chesapeake with one of the best and most vested independent boards that we have seen."
Still, Oklahoma City-based Chesapeake faces probes from the U.S. Securities and Exchange Commission, the U.S. Department of Justice and the Internal Revenue Service.
Southeastern, which owns 13.9 percent of Chesapeake's shares, also criticized the media for its portrayal of McClendon and threw its support behind the embattled executive.
"Through our multiple industry, client, professional and personal contacts, we gained insight about McClendon and arrived at a different conclusion than the image currently portrayed by Chesapeake short sellers and much of the media," the July 12 letter read.
Billionaire Carl Icahn, another largest shareholder who holds 7.5 percent of the company, has also blamed short sellers for helping to spark a decline in the company's stock. So far this year, Chesapeake shares have fallen nearly 14 percent.
Since Reuters' first report on McClendon's personal loans on April 18, the company has made a number of governance changes. McClendon was replaced as board chairman by former ConocoPhillips CEO Archie Dunham, and Icahn and Hawkins and their representatives now have control of the board.
Chesapeake, which is selling up to $14 billion in assets this year to fill large funding gaps in 2012 and 2013, is also under pressure to cut costs following years of hefty spending on acreage to drill.
Southeastern was more active in the second quarter, pushing the board and McClendon to focus on cutting spending, reducing debt and managing costs, the letter said.
Chesapeake is due to release its second-quarter earnings August 6. (Editing by Steve Orlofsky)