Tulsa World: Judge approves SemGroup reorganization plan

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Judge approves SemGroup reorganization plan

By ROD WALTON World Staff Writer
Published: 10/26/2009 8:29 PM
Last Modified: 10/26/2009 10:22 PM

SemGroup LP, once a shining light of privately held Tulsa energy companies which actually was hiding a mountain of debt, finally will emerge as a publicly traded and leaner midstream oil and gas firm after 15 months of bankruptcy, officials said Monday.

A federal judge and majority of SemGroup creditors signed off on the company’s reorganization plan Monday. The approval allows SemGroup to emerge from Chapter 11 bankruptcy as early as next month.

U.S. Bankruptcy Judge Brendan L. Shannon’s confirmation echoed a strong yes vote from most of SemGroup’s creditors. Those lenders in support held more than $4 billion of the company’s secured and unsecured debt, the judge noted.

“The record reflects overwhelming creditor support for the plan,” Shannon said at the conclusion of an 11-hour hearing in Wilmington, Del.

The new public SemGroup, however, will not be listed on a stock exchange until 2010. The reorganized SemGroup initially would offer about $1 billion in equity, according to reports.

So many SemGroup attorneys, creditors groups and other interested parties made their way to Wilmington that Shannon opened another courtroom for an audio and video feed.

The hearing also was linked with SemGroup subsidiary SemCanada’s bankruptcy proceedings north of the border.

A federal court affidavit filed by New York tabulator Financial Balloting Group LLC indicates that all of SemGroup’s creditor classes favored the reorganization plan. The secured first purchasers, secured working capital, secured

revolver, term lenders, senior notes claims and lender deficiency claims all approved the plan by large margins.

The first purchaser class, which includes oil and gas producers who were stiffed by SemGroup when they sold product on credit around the bankruptcy period, approved the plan by a 377-27 vote. The bankruptcy court’s Official Producers Committee signed off on the deal when a settlement promised more than $300 million last month.

The secured revolver/term lender category, representing more than $708 million in debts, tallied 90 creditors in favor and only two against. One of those opposing the plan disclosure was Bank of Oklahoma, which is owed $10.4 million under that creditor class.

Bank of Oklahoma also rejected the plan under its lender deficiency claimant status. The Tulsa-based financial institution is owed $43 million by SemGroup within that creditor class, according to court records.

The bank’s parent company, Tulsa-based BOK Financial Corp., was forced to turn a second-quarter 2008 profit into a loss due to its $147 million credit exposure to SemGroup, according to reports. About $97 million of that BOK credit was tied in SemGroup’s energy derivative contracts.

Shannon also approved key settlements Monday with ConocoPhillips, the J. Aron & Co. commodities trading firm and others. The move allows SemGroup to use about $122 million it previously held in escrow pending the outcome of related litigation.

ConocoPhillips and Aron will get additional unsecured claims in exchange for their support, according to reports.

SemGroup CEO Terry Ronan and Chief Restructuring Officer Lisa Donahue testified in support of the reorganization plan, which was amended three times after its introduction into the court record in May.

Ronan was on the job only four months as a finance executive when SemGroup went belly up in July 2008. He was named acting CEO after co-founder Tom Kivisto was placed on leave and later fired.

Ronan will leave SemGroup once it officially emerges from bankruptcy. Longtime energy executive Norm Szydlowski, who helped oversee the rebuilding of Iraq’s oil industry following the U.S. invasion, will take over as CEO and already is working as a consultant to the company.

Donahue is a restructuring expert hired on contract from the AlixPartners firm. She was hired by SemGroup in August 2008 after leading previous bankrupt firms Graham Field and Calpine Corp. through the Chapter 11 process.

AlixPartners is set to receive up to $7.5 million in various “success fees” earned throughout SemGroup’s bankruptcy and emergence. Ronan was not listed among SemGroup executives up for bonuses announced earlier this year.

SemGroup LP was formed in Tulsa by Kivisto, Gregory Wallace and Kevin Foxx nine years ago. The privately held storage and transport company grew by leaps and bounds into national prominence by 2005. It also became a large charitable donor and even sponsored a Tulsa LPGA golf tournament in 2007 and 2008.

Two month after the May 2008 golf event, however, SemGroup revealed it had lost at least $2.4 billion in margin calls on wrong-direction oil futures transactions. The court-appointed bankruptcy examiner, former FBI head Louis Freeh, alleged that then-CEO Kivisto secretly led a risky “short” trading strategy that bet on oil futures prices dropping even though they went to record highs in the summer of 2008.

Freeh also accused Kivisto, Wallace and Foxx of mismanaging SemGroup and, in some cases, misleading creditors and fellow employees. The examiner’s probe did not have indictment powers, but the Securities and Exchange Commission and federal authorities reportedly are looking into events surrounding the collapse.

SemGroup once employed 2,000 people nationally, including 400 in Tulsa. By late last month, however, those numbers had shrunk to 954 people around the world, and 131 locally.

By ROD WALTON World Staff Writer

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Reader comments for this story have been moved to the most updated version of the story, now under the headline "SemGroup plan to reorganize approved," which was published on 10/27/2009. So far, 4 comments have been made.