Tulsa World: SemGroup LP rivals meet

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SemGroup LP rivals meet
Common paths toward reorganization are discussed.

By ROD WALTON World Staff Writer
Published: 6/26/2009 2:18 AM
Last Modified: 6/26/2009 4:00 AM

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

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 timeline, 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 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.

Rod Walton 581-8457
rod.walton@tulsaworld.com By ROD WALTON World Staff Writer

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Some reader comments for this story were copied from "SemGroup rivals meet face to face," which was published on 6/25/2009.

	Report Comment kyote, (6/27/2009 1:53:00 PM) OK tulsa world lets move on and stop with the daily articles on Semgroup.
	Report Comment O&Gtrader, ft. worth (6/26/2009 9:31:32 AM) In Oklahoma ---or my beloved Texas for that matter--- a citizen is at greater danger of being injured by a disgruntled cheerleader's mom than a nuclear plant. That said, watch for the demand for "success fees" to start showing up in court documents as the reorganization gets under way.
	Report Comment Pinky, Tulsa (6/25/2009 4:43:02 PM) Woohooo!~ a cage match between Ronan and The Cat man today. Count me ringside, well at least emotionally.
	Report Comment Hawktalk, (6/25/2009 8:17:26 PM) What's left to fight over ?
	Report Comment Hawktalk, (6/26/2009 7:45:38 AM) merc_92; SemG has always been a broker. The new SemWhateveritsnameis will also be a brokerage. After the screwing the producers took from the old Group, I don't see oil/gas producers breaking down doors to do business with the new Group. They've poisoned their own well.
	Report Comment merc_92, (6/25/2009 10:37:06 PM) Hawktalk - you keep making statements like "give it up" and "what's left to fight over?" Obviously plenty, if creditors are still jockying for position and a stake in the new-co, and management and the board are still fighting to see who will be in control when the company emerges from C-11. This country is still driven by the use of natural gas and fossil fuels, and those natural resources will continue to play a critical role in our country's energy policy for decades to come (even with the growth of "green" energy sources) - SemGroup's midstream assets make them a valuable player to get those raw materials from well head to end user. As the price of those commodities continues to rise (and settle in to what the market should bear as a stable price range) SemGroup should be positioned to be a profitable company for the foreseeable future. As an aside, for those who are drinking the T Boone Pickens Kool-Aid and think that this country could be dependant completely on solar, wind and natural gas for our energy needs don't have a complete grasp of the overal energy picture. The most abundant natural resource in our country is coal. As long as it is plentyful and relatively inexpensive, there will be coal fired power plants in this country. Nuclear power is the greenest source of electricity technology we have. Those who worry about a plant blowing up (or being blown up by terrorists) are subscribing to a 1960's era hysteria and aren't bothering to learn about the technology of today. The issue is the large up-front cost to finance a plant and the lack of capital available given "todays" credit market realities. Finally, Obama and the car companies can build all the hybrids and electric cars they want...but until the up-front cost of a hybrid is more in line with the cost savings the consumer realizes over 5 years of ownership - they will remain a niche product and like it or not, but the combustible gas engine is still the most effecient machine to transfer mass into energy availabe on the market today - not the electric rechargable battery powered engine. All of this means that while "green" energy certainly has it's place at the table as the US enters the 21st century...and that place is growing......we will continue to be a country that is driven by the raw materials pulled out of the ground. Given that, there is PLENTY left to fight over when speaking to SemGroup.

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