Tulsa World: SemGroup overhaul plan to go to creditors

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SemGroup overhaul plan to go to creditors

By ROD WALTON World Staff Writer
Published: 7/21/2009 2:24 AM
Last Modified: 7/21/2009 4:05 AM

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

SemGroup LP's reorganization plan will go forward to a vote of creditors, but New York billionaire John Catsimatidis and his partners will not be part of the bankrupt Tulsa company's future, officials said Monday.

Catsimatidis' eight-month effort to take control of SemGroup ended with a tentative settlement between his partners, SemGroup, agent lender Bank of America and other creditors. The Catsimatidis group will resign its five seats on the management committee and withdraw its objections to the reorganization plan.

Lawsuits pitting Catsimatidis, his partners and SemGroup CEO Terry Ronan against each other also will be dismissed, according to court records.

U.S. Bankruptcy Judge Brendan L. Shannon approved SemGroup's disclosure statement, which sends the plan forward to a vote of creditors this summer. The plan calls for SemGroup to offer $2.26 billion in stock equity and cash to creditors.

The confirmation hearing is scheduled Sept. 16.

In this ruling, Shannon said SemGroup "has the full authority to prosecute the plan and disclosure statement," an apparent reference to Catsimatidis' earlier contention that SemGroup executives did not have the authority to offer the way out of Chapter 11 bankruptcy.

The settlement gives Catsimatidis'

United Refining Co. a part in the Vulcan asphalt marketing operation in New Mexico and Arizona. In exchange, United Refining will make a one-time $3.9 million payment to SemGroup, records show.

Both sides will pay their own attorneys' costs related to the previous litigation, the motion states.

Catsimatidis also steps out of the way of the proposed plan, which will reorganize the company as a public entity focused on crude oil storage, transport and marketing in this year's third quarter. He did not respond to e-mailed questions Monday from the Tulsa World.

Catsimatidis cohorts Nelson J. Happy, James Hansel, Myron Turfitt and Tulsa businessman Matthew Coughlin all will leave the management committee once the settlement is final. Coughlin was considered a "holdout" among his partners but eventually agreed to the settlement over the weekend. Shannon was angry at Coughlin for not stating his intentions earlier, according to reports.

Coughlin would not comment on the deal but directed the Tulsa World to a letter filed in bankruptcy court by his attorney, David Holden. He wrote that his client spent long hours trying to ensure that the plan included all management committee members.

"While his efforts have been referred to by more than one observer as Quixotic, I know that he was motivated by a sincere and deep sense that he was duty bound to make the effort," Holden said in the letter.

The previous lawsuit against Catsimatidis, Coughlin and others alleged they violated confidentiality agreements by waging a highly publicized attempt to take over SemGroup. Coughlin also was accused of trying to set up a secret meeting with other company executives.

An e-mail from him to former SemGroup official Randy Majors was included among court exhibits.

"Please do not share this information with anyone as I am only inviting a very select group and I do not want anyone to be offended," Coughlin reportedly wrote then-SemEuro President Majors about the "private dinner" Dec. 22 at the Summit Club in downtown Tulsa.

Coughlin denied any wrongdoing and said he invited Ronan and Chief Restructuring Officer Lisa Donahue to a reception earlier that day at his house. They declined to attend.

"None of the people we invited to the reception at my house were invited to the dinner," Coughlin told the Tulsa World for a Feb. 13 story. "We just tried to make room for everybody at different times."

Catsimatidis and fellow management committee members, meanwhile, later sued Ronan. Their complaint alleged that he "thwarted" their rightful attempts to reorganize SemGroup.

The settlement comes only weeks after Catsimatidis objected to SemGroup's first reorganization plan and was telling creditors about his own, unreported options for the company. Catsimatidis argued that he could keep SemGroup intact and guide it through Chapter 11 bankruptcy just as he did with United Refining in the late 1980s.

SemGroup co-founder and former CEO Tom Kivisto appointed Coughlin to one of his three management seats in December, according to court records. Kivisto was removed as CEO last summer and later fired and sued by SemGroup after allegedly guiding an oil futures trading strategy that lost at least $2.4 billion and forced it into bankruptcy.

SemGroup executives previously accused Catsimatidis and Coughlin of cutting deals with Kivisto and SemGroup investor Thane Ritchie for their equity in the company and seats on the management committee. In exchange, Kivisto and Ritchie allegedly would have received interests in the newly formed Tulsa Energy Acquisition group, according to reports.

Ritchie appointed Catsimatidis and Happy to his seats on the management committee four days after Coughlin joined the board. The move gave Catsimatidis five of nine seats, but hedge fund and SemGroup investor Carlyle/Riverstone retained three seats and veto power over any major decisions.

Judge Shannon previously approved SemGroup's request to a search for new directors. The search also will include the CEO's post.

Ronan will not be a candidate for that leadership role, according to reports. He joined the company as a finance officer in March 2008, four months before bankruptcy.

He was appointed to CEO when Kivisto was removed nearly one week before the July 22, 2008, bankruptcy filing, according to reports.

At its fast-rising height, SemGroup LP was one of the nation's largest privately held companies and a key supporter of local charities and events such as the LPGA golf tournament. The 9-year-old company employed as many as 400 people in Tulsa and 2,000 worldwide, according to reports.

SemGroup is selling or has dissolved its SemMaterials and SemFuels units. Employees now total about 143 locally and 998 companywide, according to reports.

Major points

New York billionaire John Catsimatidis and partners are out

Reorganization plan goes forward to vote of creditors

SemGroup CEO Terry Ronan will not lead reorganized company

United refining to pay $3.9 million for SemGroup asphalt venture

Confirmation hearing is Sept. 16

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

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