Dynagas LNG Partners and the shareholders suing it are working toward a settlement agreement, court papers show.

According to a letter filed on Wednesday, the parties have reached an agreement and are "working diligently" to put it in writing after a month's worth of deliberations.

"The process has taken longer than expected because of the number of parties and the complexity of the issues involved," lawyers said in the letter.

"The parties now expect to enter a formal stipulation of settlement by May 21, 2021."

In May 2019, shareholder Mario Epelbaum sued in the US federal court for the Southern District of New York, accusing Dynagas LNG Partners chairman George Procopiou and chief executive Tony Lauritzen of lying about the charters of two ships to buoy the company's share price.

Epelbaum was joined by a fund run by investment manager First New York and individual shareholders Scott Dunlop and Irving Braun in an amended complaint filed in September 2019.

Braun's claims included damages from losses on preferred shares, and added UBS Securities, B Riley FBR and Stifel in as defendants, as they underwrote the shares.

In both complaints, the shareholders allege that Dynagas LNG Partners maintained charters for the 149,000-cbm Ob River (built 2007) and 155,000-cbm Arctic Aurora (built 2013) that were continuations of their previous fixtures, not new deals on lower rates.

They accused management of maintaining publicly that they had the cash flow to support generous dividends, even as the company began cutting it in May 2018. They allegedly did so knowing they could only continue paying large dividends through equity raises, potentially diluting the Procopiou family's leading 42% position.

The shareholders say Dynagas LNG Partners' stock lost 80% of its value as the dividend went from $0.4225 per share to $0.0625 per share in two cuts.

Dynagas LNG Partners argued Lauritzen had disclosed the lower charter rate during a conference call and that it was possible to find out what the Ob River and Arctic Aurora were earning by looking at various financial disclosures across the US Securities and Exchange Commission filings.

The 149,000-cbm Ob River (built 2007) was chartered at a lower rate than it was previously in 2018. Photo: Dynagas

US District Judge Alison Nathan found in November 2020 that the shareholders had pleaded adequately that Dynagas LNG Partner' statements were misleading but failed to state a plausible motive, and that comments made during conference calls were opinion and not statements of fact.

She dismissed the shareholders' fraud claims but allowed claims related to damages from misstatements or omissions in filings to go forward.

Attorneys for the shareholders and Dynagas LNG Partner and the company itself did not return requests for comment.