Tulsa World: SemGroup rivals meet face to face

MAKE US YOUR HOMEPAGE | Saturday, November 21, 2009 | WIRELESS

Home > News > Article

Comment

RSS

Bookmark

SemGroup rivals meet face to face

By ROD WALTON World Staff Writer
Published: 6/25/2009 2:43 PM
Last Modified: 6/25/2009 7:29 PM

SemGroup CEO Terry Ronan and New York billionaire John Catsimatidis met face to face Thursday for the first time since they sued each other over control of the bankrupt Tulsa-based energy company earlier this year.

The meeting in Wilmington, Del., focused on possible common paths toward reorganization and also included other company officials, attorneys, bankers and unsecured creditors, according to reports.

Catsimatidis has promised to offer a reorganization plan since he took control of SemGroup LP’s management committee late last year.

“We are hopefully optimistic that reason will prevail,” Catsimatidis said in an e-mailed response to the Tulsa World. “We may meet again Friday.”

Earlier in the day, U.S. Bankruptcy Judge Brendan L. Shannon postponed hearings on both the reorganization plan and the dueling lawsuits pitting Ronan against Catsimatidis until July 20-21.

The delay allows SemGroup’s creditors to consider amendments on how they would be paid as the company tries to emerge from Chapter 11 bankruptcy. Those changes would give unsecured creditors more stake in the restructured SemGroup and also pay oil and gas producers more on some unpaid claims.

SemGroup attorneys filed the company’s exclusive reorganization plan last month, stating the company’s desire to emerge as a publicly traded midstream oil and gas entity in the third quarter. The proposed deal offered $2.27 billion in equity and cash to pay back creditors.

Shannon’s delay should not affect that time line, SemGroup spokesman

Tom Becker said. “The company is still on track to complete a successful restructuring and exit Chapter 11 by the end of September,” he said.

Bankers supported the original reorganization plan filed in Delaware bankruptcy court, but producers objected because the disclosures allegedly did not adequately explain how they would be paid back for the oil and gas sold on credit to SemGroup around the time of the Chapter 11 filing last summer.

Under the amended plan, secured creditors such as Bank of America and other lenders agreed that unsecured creditors, such as producers, would receive 5 percent of the SemGroup equity. The unsecured group also gained the option to buy into another 5 percent, according to reports.

Secured creditors initially will hold about 95 percent of SemGroup stock. Any previous shareholders, such as co-founder and former CEO Tom Kivisto, would be zeroed-out unless they could prove debt claims against the company.

The amended plan also would double the payback for unsecured creditors, up to 8.4 percent from the 4 cents on the dollar under the original reorganization filing, according to reports.

SemGroup also would pay producers about $230 million on claims for oil and gas sold in the 20 days prior to the bankruptcy petition. Producers had been seeking around $414 million, according to reports.

Founded by Kivisto, Gregory Wallace and Kevin Foxx in 2000, SemGroup was once one of the nation’s fastest growing private companies. Its annual revenue reached close to $20 billion by 2005, while it also became a large corporate donor to community causes and events, sponsoring the Tulsa LPGA golf tournament only two months before the bankruptcy.

What U.S. Examiner Louis Freeh called Kivisto’s “secretive” and “risky” oil futures trading strategy helped unravel SemGroup’s success last year, investigators alleged. Margin losses topping $2.4 billion on failed “short” positions forced the company to transfer its trading book to the Barclays financial firm last July, forcing SemGroup to acknowledge its liquidity crisis and ultimately file for Chapter 11 protection. The Securities and Exchange Commission is still investigating Kivisto’s involvement in the company’s downfall, according to reports. He was personally responsible for more than $300 million in trading losses through his wholly owned trading operations, SemGroup has alleged in court records.

Catsimatidis has been known as a brash grocery, aviation and energy company owner who helped guide United Refining Co. through Chapter 11 in the late 1980s. He arrived in Tulsa last year promising to do the same for SemGroup but ran into resistance from Ronan and other company officials.

Catsimatidis gained five of the nine seats on the management committee. He could not control the company operations, however, because hedge fund Carlyle/Riverstone held three seats and veto power on the committee.

SemGroup’s day-to-day management sued Catsimatidis in federal court, alleging that he violated a confidentiality pact and had a chilling effect on other potential bidders. His group also was accused of inviting other SemGroup officials to a secret meeting, according to reports.

Catsimatidis and his allies on the management committee, including Tulsa businessman Matthew Coughlin, later countersued Ronan. They alleged that he unlawfully thwarted their rightful efforts to lead the reorganization plan.

Register for Latest News Alerts: Every day at 4 p.m, get the day's top headlines sent directly to your inbox. It's free and easy to set up. Already a registered user? Click here to visit your profile to sign up. For new registration, click here.

By ROD WALTON World Staff Writer

Comment

RSS

Bookmark

Reader Comments

Reader comments for this story have been moved to the most updated version of the story, now under the headline "SemGroup LP rivals meet," which was published on 6/26/2009. So far, 6 comments have been made.