* EIG sends letter to investors defending loans
* Letter sent before Chesapeake board distances itself from loans
By Jennifer Ablan and Svea Herbst-Bayliss
April 26 (Reuters) - EIG Global Energy Partners, the investment firm that loaned hundreds of millions of dollars to Chesapeake Energy Corp Chief Executive Aubrey McClendon, sent a letter to some of its investors this week telling them the arrangement was a good deal, a person familiar with the situation said.
In the letter, EIG Chief Executive R. Blair Thomas told investors that two energy funds set up by the firm had loaned money to McClendon and that the financing deals were proper, the source said.
Thomas sent the letter in response to an exclusive Reuters story last week revealing a series of loans to McClendon that enabled the high-profile natural gas executive to co-invest in wells being drilled by Chesapeake.
The EIG letter was sent before Thursday's announcement that Chesapeake intends to end a program that gives McClendon a 2.5 percent stake in every one of the company's thousands of wells in 2015. The loans from the EIG funds enabled McClendon to continue his participation in the company's "Founder Well Participation Program."
Chesapeake also said Thursday that its directors had never reviewed or approved McClendon's mortgages on stakes in those wells. A lawyer for the Oklahoma City-based company earlier had said the board of directors was "fully aware" of McClendon's financing deals.
The letter from Thomas was received this week by a number of pension funds that invested in the EIG-sponsored funds: EIG Energy Fund XIV and EIG Energy Fund XV. At least one public pension fund that invested in Energy Fund XV was holding a meeting Thursday to discuss the situation, according to second source, a person familiar with a pension fund who did not want to be identified.
Thomas, in the letter to investors, blamed the media for "making something out of nothing" in its reporting on the McClendon loans, said the first source, who lacked the authority to discuss the letter and declined to be identified.
EIG did not respond to a request for comment.
Two pension fund representatives, who were not permitted to speak about the investments publicly but were familiar with the EIG marketing materials, said that EIG's limited partners were well aware of the loans to McClendon and that EIG has gotten high marks for transparency by sending quarterly updates.
Reuters earlier reported that EIG Energy Fund XV loaned $500 million to McClendon, while EIG Energy Fund XIV loaned $375 million to him.
The U.S. Securities and Exchange Commission has opened an informal inquiry into the Chesapeake well participation program. The inquiry is being led by the SEC's Fort Worth, Texas, regional office.
Some Chesapeake shareholders and corporate governance experts are saying the loans from the EIG funds could pose a conflict of interest because the investment management firm also has been a financier of the natural gas company.
More than a dozen public pension funds invested in the EIG Energy Fund XV, which raised about $4.1 billion from investors in the United States, Europe and Australia. Some of the state pension funds that put money into that fund include ones from Alaska, Connecticut, Louisiana, Maryland, Minnesota, Missouri and Texas, according to research firm Preqin.
The EIG Energy Fund XV, the firm's newest one, was pitched to pensions as a chance to capture some of the profits generated by those wells.
In January 2011, EIG split off from TCW, a large investment management firm best known for its bond mutual funds. Prior to the split, TCW had a long history of raising money for the oil and gas sector.
Thomas and two other EIG partners had worked for TCW before the split. TCW, under an agreement with EIG, continues to collect some of the revenue from the firm, which specializes in raising money for energy companies.
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