Tulsa World: SemGroup creditors ask to see bank data

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SemGroup creditors ask to see bank data
They want to examine the bankrupt firm's relationship with BOK.

Bank of Oklahoma has a branch at the Tulsa Hills shopping center. Stephen Pingry / Tulsa World

By ROD WALTON World Staff Writer
Published: 7/28/2009 2:22 AM
Last Modified: 7/28/2009 6:32 AM

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

Investigators for a SemGroup LP creditor group want to pore over documents about BOK Financial Corp.'s eight-year credit relationship with bankrupt SemGroup, they requested in a court motion filed Monday.

Attorneys for BOK, which has its headquarters in Tulsa, have said that they will not object to the request by the Official Committee of Unsecured Creditors, the group wrote in its motion. BOK's subsidiary Bank of Oklahoma was a key lender to SemGroup throughout the company's history until its July 2008 bankruptcy.

SemGroup's traders, led by its co-founder Tom Kivisto, are accused of exceeding the bank's $50 million trading limit by $80 million, despite warnings by BOK's risk managers, and eventually forcing the financial group into a second-quarter net loss last year.

"Accordingly, because there can be no question that BOK had business dealings and relationships with the debtors and/or their representatives, it is subject to examination," the creditors' original July 10 motion read.

A BOK Financial spokesman could not be reached for comment. The creditors' motion did not accuse the bank of any wrongdoing, although it noted that BOK officials went on Caribbean trips paid for by SemGroup.

The court-appointed bankruptcy examiner, former FBI Director

Louis Freeh, also alleged that Kivisto; another SemGroup co-founder, Gregory Wallace; and former SemGroup Treasurer Brent Cooper misled BOK and other creditors about the company's trading practices. The examiner does not have indictment power, and both Kivisto and Wallace have denied any wrongdoing.

SemGroup and BOK maintained a long business relationship since SemGroup started in 2000. Kivisto and his partners eventually built it into one of the country's biggest private companies before a liquidity crisis forced it into bankruptcy.

The examiner alleged that Kivisto kept the growing crisis hidden from his creditors. He was even named to BOK Financial Corp.'s board of directors and part of its loan committee in 2006.

However, SemGroup attracted the scrutiny of BOK's risk managers during the next year because the company's trading exceed its $50 million credit limit, the motion reads.

Reports show that BOK representatives told Kivisto and others in November 2007 that they were concerned about "deep in the money" trades on oil futures.

Kivisto reportedly told BOK that SemGroup had the cash to cover the trading positions. The credit exposure, however, reached $130 million by December, reports show.

BOK risk managers tried to craft a plan that would get SemGroup back within the trading limit. It included limits on rolling the trades forward — maintaining the futures positions — and posting a cash margin for the full amount over the limit after July 1, 2008.

BOK did not impose that cash margin requirement, although SemGroup traded on its credit account for 10 days past a July 1 deadline, reports show. The company filed for bankruptcy July 22 of that year.

The credit exposure ultimately reached $147 million, records show. BOK was forced to revise its calculations for 2008's second quarter, turning what had been a $43.7 million profit into a $1.2 million net loss.

The bankruptcy ended Kivisto's long relationship with the bank. BOK Financial provided credit for his Eaglwing Trading Co. since 1993, reports show. Both Eaglwing, which was folded into SemGroup, and Westback Purchasing Co., another Kivisto trading project, maintained checking accounts with BOK, the creditors' motion reported.

A BOK representative also told investigators that some bank officials took part in two- or three-day trips to the Bahamas paid for by SemGroup, the motion states. Those trips reportedly were provided to various executives at banks with whom the company did business.

In related news, SemGroup's subsidiary SemCanada Crude Co. filed for U.S. bankruptcy protection, Bloomberg News reported Monday. The Chapter 15 filing seeks protection from creditors in the U.S. while its Canadian bankruptcy case is pending.

BOK-SemGroup time line

Early 2000: Bank of Oklahoma lends $58 million to Kivisto group to buy Dynergy Pipeline and Storage in Cushing. This deal is the linchpin of Sem- Group’s founding.

June 2000: BOk leads in the company’s purchase of Petrosource.

2003: The company, now called SemGroup, seeks to expand its credit facility to $100 million. BOK talks with Fleet Bank about assuming that leadership role. Fleet later is taken over by Bank of America, now the administrative agent in SemGroup’s bankruptcy.

February 2006: SemGroup’s CEO and co-founder Tom Kivisto joins BOK Financial Corp.’s board of directors and loan committee.

September 2007: SemGroup exceeds its $50 million oil futures trading limit set by BOK.

November 2007: BOk officials tell Kivisto that they are concerned about trades “deep in the money.” Kivisto reportedly assures bankers that Sem- Group has cash needed to pay for rolling trades forward.

December 2007: BOk’s credit exposure to SemGroup trading reaches $130 million — $80 million over the limit. The bank’s risk managers come up with guidelines to bring the credit exposure back down to $50 million — including a cash margin required for full amount over the limit by July 1, 2008.

May 2008: Bank officials meet with SemGroup, which assures them the firm is liquid and expecting a large infusion of cash.

June 30, 2008: BOk’s credit exposure to SemGroup reaches $147 million, but the company continues to roll trades forward, maintaining futures positions on the New York Mercantile Exchange.

July 10, 2008: Date of the last SemGroup futures trade placed in BOk’s account. The bank did not impose the required cash margin for going over the $50 million trading limit.

July 16, 2008: SemGroup’s lack of liquidity forces it to transfer its trading book to Barclay’s, turning those futures positions into a realized $2.4 billion loss. Kivisto soon is placed on administrative leave and resigns from BOK’s board.

July 22: 2008: SemGroup LP files for Chapter 11 bankruptcy protection in Wilmington, Del.

August 11, 2008: BOK Financial Corp.. revises its second-quarter earnings from $43.7 million profit to $1.2 million loss, citing its SemGroup credit exposure.

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

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	Report Comment Tony G, Tulsa (7/28/2009 6:57:31 AM) I believe they should go further, investigate everything BOK has been involved in, including the relationship with our mayor.
	Report Comment Webmeister, Tulsa (7/28/2009 1:58:36 PM) If SemGroup could have held out just three more weeks, their reckless, under-margined bet on oil commodity futures would have paid off, as they had predicted the price of oil crashed....and bet accordingly.
	Report Comment Webmeister, Tulsa (7/28/2009 4:14:55 PM) Appears that Kivostos' Unsecured Kreditors Kommittee wants to peak inside Kaiser's Kimono..... Those, naughty, naughty boys......
	Report Comment human1, A change is gonna come someday (7/28/2009 3:41:49 PM) This is just another Enron
	Report Comment low radar, (7/29/2009 3:51:27 PM) test
	Report Comment low radar, (7/29/2009 5:39:44 PM) Someone should check if Bank Of America executives made the same kind of trips. I bet you will see they made more than one or two over the years.
	Report Comment O&Gtrader, ft. worth (7/28/2009 9:43:50 AM) Simply stunning everytime one reads about it. It is so perfect a tale of risk management woe that it deserves jewel-like award status in the history of oil trading. Even the Amaranth idiots would have to slap their forehead in wide eyed amazement when they read about the SemGroup story.
	Report Comment O&Gtrader, ft. worth (7/30/2009 9:38:45 AM) Webmeister: If the Hindenburg airship hadn't blown up it would have been a great money making airship for a long time. If the Titanic hadn't hit an iceberg at full speed it would have been a long term trans Atlantic money maker. If the UK's "Comet" jetliner hadn't come apart in flight twice it would have been a constant money-maker for British Airways. If Semgroup could have held out for just 3 more weeks..... The trouble is, unlike in the case of the Titanic, Hindenberg and Comet, it appears that some folk knew the risk of SemGroup (see rtecent stories about BOKF and Prudential's concerns) but couldn't muster up the scrotal contents to mitigate the potential risk to investors, producers, lenders and vendors.

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