Tulsa World: SemGroup reorganization plan wins judge's OK

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SemGroup reorganization plan wins judge's OK

By ROD WALTON World Staff Writer
Published: 9/25/2009 2:23 AM
Last Modified: 9/25/2009 4:05 AM

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

The bankruptcy judge overseeing SemGroup LP's Chapter 11 case approved the Tulsa company's disclosure statement Thursday, sending its reorganization plan to a vote of creditors.

The disclosure statement details the reorganization plan.

If most of the creditors favor SemGroup's plan, the privately held company could emerge as a publicly traded midstream oil and gas firm as early as Nov. 6, according to reports.

U.S. Bankruptcy Judge Brendan L. Shannon's also approved SemGroup's proposed settlement with secured creditors and producers. The deal would pay producers up to $337 million for oil and gas bought on credit around the time of the July 2008 bankruptcy.

Secured and unsecured creditors now can vote on the plan. The confirmation hearing is set for Oct. 26 in Shannon's courtroom in Wilmington, Del.

If the plan is approved, the reorganized SemGroup could emerge from Chapter 11 as early as 10 days later.

SemGroup CEO Terry Ronan said in a statement Thursday, "We look forward to presenting our plan for confirmation and successfully concluding the Chapter 11 restructuring."

SemGroup, formed in 2000 by Tom Kivisto, Gregory Wallace and Kevin Foxx, grew into one of the country's largest private companies by 2005. The energy

empire centered on buying, storing and transporting oil, gas and asphalt. It had more than 2,000 employees.

What court-appointed Examiner Louis Freeh called a "risky" and "secretive" oil futures trading strategy focused intently on short positions because Kivisto believed that spring 2008's rising oil prices would return to historical norms — eventually undid SemGroup's balance sheet. The company filed for bankruptcy protection after admitting more than $2.4 billion in margin losses on those futures trades, reports say.

SemGroup initially indicated that it would sell off its pipeline, terminal and transportation assets to pay creditors. By early this year, however, company officials were planning the reorganization and emergence.

Producers proved a major sticking point in that effort. Oil and gas companies, royalty owners and other working interests were left unpaid while SemGroup worked out its debts to secured creditors.

At one point, that payback was as low as 4 cents on the dollar while secured creditors were promised 95 percent of SemGroup's cash and equity, according to reports. It is not known what producers are to get in cents on the dollar under the new deal, but originally they claimed to be owed between $400 million and $1 billion.

SemGroup has sold off much of its asphalt and refined petroleum units — SemMaterials and SemFuel, respectively. The reorganized entity will focus on SemCrude services, according to reports.

SemGroup now employs 954 people around the world, including 131 in Tulsa.

SemGroup timeline

July 16, 2008: More than $2.4 billion in oil futures trading losses forces SemGroup to sell its New York mercantile Exchange positions to Barclay’s.

July 22, 2008: SemGroup files for Chapter 11 bankruptcy protection.

Oct. 14, 2008: Former FBI Director Louis Freeh is appointed as bankruptcy examiner and begins a four-month inquiry.

Oct. 27, 2008: The company’s co-founder Tom Kivisto, on leave since July, is fired. He and the other co-founders, Gregory Wallace and Kevin Foxx, are later sued by the company.

April 15: Freeh’s report alleges wrongdoing and mismanagement by Kivisto, Wallace, Foxx and others.

May 15: SemGroup files its first reorganization plan, offering $2.26 billion in equity and cash, mainly to secured creditors. Producers object to paybacks of as little as 4 cents on the dollar.

Aug. 25: The latest SemGroup reorganization plan offers $253 million to producers. many companies still object.

Sept. 13: Secured lenders and producers groups meet in mediation. Talks eventually produce a settlement for payments up to $337 million.

Tuesday: SemGroup files a fourth amended reorganization plan that includes a settlement with producers.

Thursday: U.S. Bankruptcy Judge Brendan L. Shannon approves the latest disclosure statement, sending the plan to a vote of creditors.

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 "Judge approves SemGroup’s latest plan," which was published on 9/24/2009.

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