Main Street Natural Gas Bonds Connection to Lehman Brothers May Not Have Been Disclosed to Investors

Main Street Natural Gas Bonds, a financing vehicle of the Municipal Gas Authority of Georgia, were sold by many Wall Street brokerages as safe and conservative municipal bonds. However, the bonds were complex derivative securities backed by Lehman Brothers. When Lehman filed for bankruptcy in September 2008, the value of the Main Street Bonds plummeted.

The investors of Main Street Natural Gas Bonds are now claiming that not only did their brokers not disclose the risk associated with investing in the bonds, but they also failed to inform their clients that the bonds could be affected by Lehman Brothers financial health. Wall Street firms marketed and sold Main Street Natural Gas Bonds as conservative, safe municipal bonds, when in fact, they were Lehman Brothers-backed complex derivative securities. When Lehman Brothers filed for bankruptcy in 2008, the value of the bonds dropped.

“We don’t expect payment due to the bankruptcy, so the bondholders will likely join unsecured creditors in bankruptcy court,” said Susan Reeves, chief financial officer of the Kennesaw, Georgia-based authority, which provides gas for municipalities from Florida to Pennsylvania. “We don’t believe any other avenue is likely at this point.”

All three major rating companies cut the bonds’ rating to speculative grade after Lehman’s filing. They are rated B3 by Moody’s Investors Service, C by Fitch Ratings and D by Standard & Poor’s, according to data compiled by Bloomberg.

Given the Chapter 11 action, “we believe the funding of the early termination payment” by the parent company or the commodity unit is “unlikely,” S&P said.

Lehman bondholders may get anywhere from zero to 29 cents on the dollar, according to Peter Plaut, an analyst at Imperial Capital LLC, who said the bank’s senior unsecured bonds may be a “buy” at 15 cents. Lehman, once the fourth-largest U.S. securities firm, is selling assets to pay creditors as part of its liquidation in U.S. bankruptcy court in Manhattan.

If you were an investor who lost money in Main Street Natural Gas Bonds call a FINRA Securities arbitration lawyer for a free consultation on how to recover your losses. Call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC. Representing investors nationwide before FINRA and the NFA.