Tulsa World: Sem amends, extends plan

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Sem amends, extends plan
A new reorganization plan offers more money to oil and gas producers.

By ROD WALTON World Staff Writer
Published: 8/26/2009 2:25 AM
Last Modified: 8/26/2009 3:58 AM

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

SemGroup LP amended its reorganization plan one more time Tuesday, offering oil and gas producers $43 million in new money for those who sign on to the proposal.

The newest disclosure statement, filed in U.S. Bankruptcy Court in Wilmington, Del., also seeks to push back the plan's confirmation hearing until Oct. 26. The previous hearing date was Sept. 16.

Oil and gas producers in Oklahoma, Texas and Kansas sued SemGroup LP for more than $400 million owed for supplies sold on credit to the company in the period before its bankruptcy filing in July 2008. Judge Brendan L. Shannon ruled that secured lenders held priority liens above unsecured creditors, but producers challenged his decision in the Third Circuit U.S. Court of Appeals.

The appellate court will hear oral arguments on that challenge in October, weeks after the current confirmation date. The reorganization plan, seeking to turn SemGroup into a public company offering $2.26 billion in cash and equity to its creditors, must gain creditor and court approval before the company can emerge from its Chapter 11 protection and limitations.

The first reorganization proposal was filed in May but amended a month later after significant opposition from oil and gas producers. Tuesday's disclosure indicates

that SemGroup will pay up to $253 million to creditors who "opt in" to the settlement.

Unsecured creditors would receive about 8 cents on the dollar under the June amended reorganization plan. The first reorganization plan allocated only about 4 cents on the dollar, according to reports.

Secured creditors would still receive about 95 percent of the company's value. SemGroup hopes to emerge later this year as a public company focused on crude oil storage and transportation services, according to reports.

Oklahoma producers allege that state "constructive trust" law sets aside the proceeds for their oil and gas in a special fund that is safe from other creditors.

State Attorney General Drew Edmondson has filed an amicus (friend of the court) brief arguing that the Oklahoma Supreme Court, and not a bankruptcy judge, should decide the "constructive trust" issue.

SemGroup's reorganization disclosure warned that the company may have to liquidate assets and convert to a Chapter 7 bankruptcy if the plan is rejected. Former subsidiaries such as the SemMaterials asphalt and SemFuel refined petroleum storage units already have sold off assets or wound down.

The 9-year-old SemGroup firm exploded into corporate limelight this decade, acquiring assets to become one of the nation's biggest private companies by 2005. Three years later, it was forced to file for Chapter 11 protection after losing at least $2.4 billion in margin calls on failed oil futures trades.

A court-appointed U.S. Bankruptcy Examiner alleged after a four-month inquiry that SemGroup co-founders Tom Kivisto and Gregory Wallace mismanaged the company via a risky and secretive trading strategy, misled creditors about those losses and paid themselves millions of dollars in bonuses without management committee oversight.

The Securities and Exchange Commission is investigating the SemGroup collapse.

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 Energy reports $3.5 million second quarter net loss," which was published on 8/25/2009.

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kyote, (8/25/2009 12:29:17 PM)

I wish the TW would would get off semgroups case and move on to more pressing news coverage

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Hawktalk, (8/26/2009 9:02:23 AM)

Kudos to the TW for its continued coverage. The SemFiasco cost thousands of families their prime income and wrecked the careers of thousands more.
Kivisto and his partners stung other energy corporations for hundreds of millions of dollars, yet they still live well. And a clique of insiders continues to feed off the corpse, winning bonuses and rewards for prolonging the ordeal.
This isn't so much a news story as it has become business school morality tale. ($.08 on the dollar; oh, that's good!)

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