Tulsa World: SemGroup pact in the works

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SemGroup pact in the works
Two creditor groups support a plan to reorganize the company.

By Staff and Wire Reports
Published: 6/3/2009 2:23 AM
Last Modified: 6/3/2009 4:02 AM

Complete coverage: Read all the stories and documents related to the SemGroup collapse.

Two of SemGroup LP's three main creditor groups tentatively agreed Tuesday to support a plan to reorganize the bankrupt Tulsa energy business.

The agreement in principle is a step toward ending the company's bankruptcy so it can leave court protection, attorneys for SemGroup's lenders and unsecured creditor committee said in a hearing in Wilmington, Del.

The deal, which has not yet been put in writing, doesn't include the company's small oil suppliers, the third group of creditors.

"Now that at least three legs of this chair are together, we would like to get the fourth leg in place," said Susheel Kirpalani, an unsecured creditors attorney.

SemGroup has proposed a plan that would pay creditors with cash and stock in the reorganized company. The plan is worth about $2.27 billion to creditors, the company said in a statement last month.

The company's lenders, who are owed about $2.5 billion, agreed to increase the amount that unsecured creditors would recover, SemGroup's attorney Martin Sosland told U.S. Bankruptcy Judge Brendan Linehan Shannon. The extra money would come from the lenders' share, Sosland said.

Under bankruptcy court rules, unsecured creditors, whose claims aren't backed by collateral, typically collect

money only after full repayment to lenders, whose claims are guaranteed by assets.

Dozens of the small suppliers that provided SemGroup with much of its crude oil, sued the company over who should be paid first and how much they are entitled to collect. A lawyer representing those U.S.-based suppliers said they weren't included in the talks that led to agreement between the unsecured creditors and the lenders.

"There have been no discussions," supplier's attorney Peter S. Goodman said in court.

The reorganization plan would give the lenders the majority of the new stock, while creditors would get some

stock and warrants to buy more, Sosland said.

SemGroup will seek court authority at a June 25 hearing to have creditors vote on the plan.

The company said it has arranged to borrow $500 million to help it exit bankruptcy and that it will issue $300 million worth of secured notes in the plan.

After SemGroup filed for bankruptcy in July, company managers said they would liquidate all assets to repay as much as $9.47 billion in debt.

In March, the company signaled a change in direction when it sent a memo to employees saying it might exit bankruptcy in the third quarter as a public company.

Also Judge Shannon approved a request from SemGroup to hire Russell Reynolds Associates Inc., an executive search firm, to find a CEO, chief financial officer and board members to run the company after it exits bankruptcy.

So far, company officials have not commented on whether CEO Terry Ronan would leave the company after it reorganizes.

Ronan joined SemGroup in March 2008 as a finance executive. He was named CEO after co-founder Tom Kivisto was removed from the post shortly before the company's July 22 filing for Chapter 11 bankruptcy protection.

SemGroup co-founder Gregory Wallace

was the original CFO. He also is no longer with the company.

Ronan has been in charge of SemGoup's day-to-day operations throughout the bankruptcy process.

In other company news, SemGroup LP said Tuesday that its White Cliffs Pipeline has begun operations.

The 12-inch pipeline carries crude oil 525 miles from near Platteville, Colo., to storage tanks owned and operated by SemGroup at Cushing.

"Commencing commercial operations on White Cliffs is a major milestone for SemGroup and our customers," said Pete Schwiering, president of SemCrude, the SemGroup division that oversees crude oil distribution and storage.

Tulsa World Business Editor John Stancavage contributed to this report by Bloomberg News.

By Staff and Wire Reports

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