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Continental CEO Hamm pledges $2.6 billion in shares to secure personal loan

Harold Hamm, founder and CEO of Continental Resources, enters the courthouse for divorce proceedings with wife Sue Ann Hamm in Oklahoma City, Oklahoma September 22, 2014. REUTERS/Steve Sisney

By Joshua Schneyer

(Reuters) - Continental Resources Inc (CLR.N) said that Harold Hamm, its chief executive officer and majority shareholder, has pledged about one-fourth of the company shares he owns as collateral for a personal loan, according to a regulatory filing.

The shares Hamm posted as collateral are worth $2.6 billion and represent an 18.5 percent chunk in the Oklahoma-based drilling giant, according to a Reuters calculation. Hamm could be forced to offer more collateral for the loan if the value of his company falls.

Divorce lawyers for Hamm recently said he took out a personal loan to fund a divorce settlement with ex-wife Sue Ann Arnall. Under a November ruling, Hamm owed Arnall nearly $1 billion and last week cut her a handwritten check for the entire amount.

Hamm pledged 68.7 million of his Continental shares as collateral for a personal loan on Jan. 9, according to a Jan. 13 Securities and Exchange Commission filing. The document did not state the purpose nor the terms of the loan, how much Hamm borrowed or who lent him the money.

Hamm will need to pledge additional shares if the price of Continental stock falls below the "minimum value requirements" of the loan, the company said without offering specifics.

Hamm owns nearly 253 million shares, or 68 percent of his firm. He will keep voting rights over the shares posted as collateral, the firm said.

Following news of Hamm's loan, Continental shares initially fell on Wednesday, but rallied late in the day, jumping 6.1 percent to $37.98.

Continental has said the divorce award, one of the largest in U.S. history, has no impact on its business or operations. "As we have said all along, there will be no change of control in the company," said spokeswoman Kristin Thomas.

Hamm's personal borrowing won't damage the company or other shareholders unless Continental shares continue to fall sharply on lower oil prices, said one energy analyst. The shares have lost more than half of their value over the last four months.

"An issue could arise at some point," said Leo Mariani of RBC Capital Markets in New York. "If oil prices fall he would have to pledge a much greater portion of his company. He could lose those shares and they could be sold at depressed prices."

That risk is low, Mariani said, because oil prices are unlikely to fall much further or to remain low for years. U.S. benchmark crude oil has been trading below $50 a barrel, down from around $100 a barrel six months ago.

(Additional reporting by Brian Grow in Atlanta; Editing by Jeffrey Benkoe and Phil Berlowitz)