Tulsa World: SemGroup, creditors reach pact

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SemGroup, creditors reach pact
The Tulsa-based company may emerge from Chapter 11 in two months, according to court documents.

By ROD WALTON World Staff Writer
Published: 9/17/2009 2:28 AM
Last Modified: 9/17/2009 4:14 AM

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

SemGroup LP's creditors and producers owed millions for oil and gas sold before bankruptcy have come to an agreement that could allow the Tulsa-based company to emerge from Chapter 11 in two months, according to court documents.

Mediation last weekend apparently quieted key battles between secured lenders such as Bank of America and the Official Producers Committee.

Oil and gas producers claimed they were owed more than $400 million by SemGroup for transactions around the time of the July 2008 bankruptcy petition, according to reports.

"The debtor is now poised to emerge in November 2009 as an independent company with new management and a new board of directors," says the motion filed Tuesday evening in U.S. Bankruptcy Court in Wilmington, Del.

"All that remains now is solicitation and court approval of an amended Chapter 11 plan that embodies the global settlement achieved by the parties," the motion adds.

SemGroup also is requesting that U.S. Bankruptcy Judge Brendan L. Shannon release $122 million held in escrow so the money can be distributed to creditors.

The reorganization plan calls for SemGroup to emerge as a publicly traded company offering $2.26 billion in cash and equity to its creditors.

The confirmation

hearing on SemGroup's reorganization plan is set for Oct. 26 in Wilmington.

SemGroup and its creditors have clashed with producers since the beginning of this year.

Producers claimed that they and other interest owners were owed up to $1 billion after SemGroup took possession of vast amounts of oil and gas on credit, according to reports.

Ultimately, producers argued for more than $400 million, including approximately $180 million owed to Oklahoma interests.

The amended reorganization plan offered as much as $253 million, including cash payments for those who "opt in" to the settlement, according to reports.

Shannon rejected a producers' argument that they represented a "constructive trust" and that their money should be held separately from funds owed to secured lenders. Secured lenders will receive about 95 percent of the value of the reorganized SemGroup.

Producers took their fight to the Third Circuit U.S. Court of Appeals, but that challenge, scheduled for arguments next month, may be moot now that an agreement was reached.

The sides met last weekend in mediation talks with U.S. District Judge Kevin Gross of Delaware.

The deal was reached "after nearly 24 hours of continuous mediation," the court motion states.

"We deeply appreciate the tireless efforts of Judge Kevin Gross in mediating the complex issues and helping the parties consensually resolve their disputes," SemGroup CEO Terry Ronan said in a statement released Wednesday.

The original reorganization plan was offered in May but twice has been amended after objections from producers and other parties.

The reorganized SemGroup hopes to focus on its crude oil gathering, storage and transport services.

The company already has sold off much of its SemMaterials asphalt and SemFuel refined storage assets.

SemGroup also paved the way for its new corporate leadership earlier this month with the hiring of longtime petroleum and pipeline executive Norm Szydlowski as its new CEO and president, effective when the company emerges.

Former Citgo Petroleum executive Philip Reedy was named chief financial officer, and a new board of directors was appointed.

Szydlowski and Reedy are working as consultants alongside Ronan during the pre-emergence period. Ronan has led SemGroup since co-founder and original CEO Tom Kivisto was placed on administrative leave and later fired.

Ronan will not stay with SemGroup past the reorganization, according to reports. He joined SemGroup as a finance executive only months before the bankruptcy.

A court-appointed examiner's investigation, led by former FBI Director Louis Freeh, determined that SemGroup collapsed mainly because of its risky and secretive oil futures trading strategy led by Kivisto.

The company filed for Chapter 11 protection after admitting at least $2.4 billion in margin losses on trades at the New York Mercantile Exchange.

Freeh's investigation, which does not have indictment power, also alleged that Kivisto and co-founders Gregory Wallace and Kevin Foxx mismanaged the company's assets.

Kivisto and Wallace, who also left SemGroup after the bankruptcy, are accused of paying themselves millions in improper bonuses.

The Securities and Exchange Commission is investigating SemGroup's 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 creditors and producers come to agreement," which was published on 9/16/2009.

	Report Comment bingo, Jenks (9/16/2009 9:37:49 AM) So when should I start buying stock in Sem again?
	Report Comment Hawktalk, (9/16/2009 1:24:24 PM) bingo: I have 250 shares of SGLP. They can be yours for $11/share, half what I paid.
	Report Comment Ab's Dad, (9/19/2009 8:24:17 PM) So how much will the operators get out of this agreement?

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