Tulsa World: SemGroup reorganization plan meets resistance

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SemGroup reorganization plan meets resistance

By ROD WALTON World Staff Writer
Published: 6/18/2009 6:45 PM
Last Modified: 6/18/2009 6:46 PM

Opposition to SemGroup LP’s reorganization plan mounted Thursday from oil and gas producers, former trading partners and the man who claims the right to run the bankrupt Tulsa-based energy company.

An objection filed Thursday by New York billionaire John Catsimatidis and his fellow members of the SemGroup management committee alleges that both the disclosure statement and reorganization plan were filed ultra vires, Latin for “beyond powers,” and should be rejected by the bankruptcy judge.

Tulsa-based Samson Resources Co., J. Aron & Co., Chesapeake Exploration LLC, Koch Materials and others also argue in separate filings that SemGroup’s disclosure statement is inadequate for consideration by creditors. The statement, released with the proposed reorganization plan last month, will be considered at a June 25 hearing in U.S. Bankruptcy Court in Wilmington, Del.

Catsimatidis was joined in the objection by business partners and fellow committee members Matthew Coughlin, James Hansel, J. Nelson Happy and Martin Bring. The New York billionaire gained control of the general partner interest last year but is locked in a court battle with SemGroup CEO Terry Ronan over who has the right to guide the reorganization.

The lawsuits pitting Ronan against Catsimatidis will be heard jointly, according to reports.

Samson Resource Co.’s objection claims that SemGroup did not include any input from oil and gas producers when it crafted the reorganization plan and disclosure statement, nor details on how they will repaid in full. They

also alleged that the proposed plan favors the lenders, lawyers and other firms already guiding SemGroup through bankruptcy.

“The debtors’ proposed treatment of producers’ claims as described in the disclosure statement and proposed plan is remarkable not only on the convoluted and opaque way in which it is presented,” the Samson objection states, “but for its boldness in contravening long-standing bankruptcy protections afforded to creditors like producers.”

SemGroup LP filed for Chapter 11 bankruptcy protection last summer after racking up $2.4 billion in oil futures trading losses and at least another $3.5 billion in debts to banks, hedge funds and other creditors. The 9-year-old firm and its subsidiaries traded, stored and transports oil, gas and asphalt.

The reorganization plan calls for SemGroup to emerge as publicly traded entity in the year’s third quarter, pending court and creditor approval. The company would offer about $2.27 billion in equity and cash to help pay off creditors.

Secured lenders such as Bank of America would own more than 90 percent or the reorganized SemGroup, according to reports. The Samson objection argued that pre-petition lenders will receive $530 million of the cash on hand, while producers have their claims reduced.

“The so-called SemGroup debtors have been hijacked by the banks, lawyers and other professionals working for them,” Samson Chief Financial Officer Phil Tholen said Thursday. “The plan favors those people.”

The Official Producers Committee, of which Samson is a member, filed its own objection against the reorganization disclosure. The committee’s June 10 preliminary objection called SemGroup’s plan “misleading” and “patently unconfirmable.”

Tulsa-based New Dominion LLC filed a joinder Thursday to the objection by the producers committee.

The flurry of producers’ resistance countered the support offered SemGroup by lenders and the unsecured creditors’ committee earlier this month. The plan, if approved, would allow SemGroup to borrow another $500 million and issue $300 million worth of secured notes to help it exit bankruptcy.

Oklahoma producers such as Chesapeake Exploration and Special Energy Corp. also filed an objection Thursday. Those plaintiffs are asking that the June 25 hearing on moving the reorganization plan to a vote be delayed until Bankruptcy Judge Brendan L. Shannon has ruled on the claims on oil and gas sold to SemGroup from Oklahoma, Texas and Kansas producers.

J Aron is the commodity trading arm of the Goldman Sachs investment firm. J. Aron brokered SemGroup’s oil futures transactions on the New York Mercantile Exchange. The company was forced to file for bankruptcy after the trading book was sold to the Barclays financial firm, according to reports.

J. Aron already had agreed to pay SemGroup about $89 million for previous energy-trading transaction, but is entangled in an ongoing court battle over indemnity, warranty and fees. The brokerage firm’s limited objection seeks changes in the how the disclosure statement words J. Aron’s rights and defenses against SemGroup.

River View Pipelines LLC, Cimarron Gathering LP and DBGG LLC also opposed the disclosure statement because it allegedly fails to give adequate information about the resolution of administrative claims against SemGroup. All three entities are affiliates of dozens of others producers and related firms jointly filed another objection Thursday afternoon.

Dell Computer founder Michael Dell, meanwhile, has increased his ownership stake in publicly traded SemGroup Energy Partners LP. Dell’s MSD Capital investment fund now owns 3.4 million shares, or 16 percent, of SGLP, up from 2.7 million shares and 13 percent earlier this year, according to U.S. Securities and Exchange Commission filings.

SemGroup LP spun off some of its terminal, pipeline and trucking assets to form SGLP and take it public in July 2007. The subsidiary, which separated itself from SemGroup’s control following a loan default last summer and is not a debtor in the bankruptcy case, is now trading for $6.07 per unit on the over-the-counter Pink Sheets electronic market.

SGLP shares fell as low as 87 cents in the wake of SemGroup’s bankruptcy but gained a two-year credit waiver from its senior lenders and new customers for its fee-based asphalt and oil storage services, according to reports.

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By ROD WALTON World Staff Writer

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Reader comments for this story have been moved to the most updated version of the story, now under the headline "Oil and gas producers raise ante on SGLP," which was published on 6/19/2009. So far, 2 comments have been made.