Tulsa World: SemGroup plan to reorganize approved

MAKE US YOUR HOMEPAGE | Saturday, November 21, 2009 | WIRELESS

Home > News > Article

Newspaper View Print this story

Comment

RSS

Bookmark

SemGroup plan to reorganize approved

By ROD WALTON World Staff Writer
Published: 10/27/2009 2:20 AM
Last Modified: 10/27/2009 3:52 AM

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

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.

From ruins to reorganization: SemGroup timeline

2000: Tom Kivisto, Gregory Wallace and Kevin Foxx combine oil, gas and asphalt terminal and transportation assets to form a company ultimately named SemGroup LP.

2006: Forbes magazine names SemGroup as the fifth-largest private firm nationally; 2005 revenues total $20 billion.

July 2007: SemGroup takes subsidiary SemGroup Energy Partners public on the Nasdaq Exchange; 12.5 million units trade for $22 each.

Early 2008: New York mercantile Exchange oil futures begin historic rise to $147 per barrel by July; SemGroup’s “short” strategy bets wrongly that prices will return soon to historic norms.

May 2008: Newly hired financial vice president Terry ronan expresses concerns about SemGroup’s liquidity as it meets margin calls on the NYMEX. He warns that the company risks “being underwater” later that week.

July 7, 2008: Mark-to-market analysis reveals $3 billion in trading losses.

July 16, 2008: Nymex account is transferred to Barclay’s, forcing Sem- Group to recognize $2.4 billion in losses.

July 17, 2008: Rumors about SemGroup’s liquidity collapse drops SGLP trading units 50 percent in one day, down to about $11 per unit. SGLP release admits parent’s cash-flow crisis.

July 22, 2008: SemGroup LP files for Chapter 11 bankruptcy protection in Delaware, where it was incorporated. Company later lays off hundreds of employees in Tulsa and nationwide. ronan is earlier named CEO.

August 2008: Bankruptcy judge approves $150 million in debtor-in-possession financing to keep SemGroup afloat while it prepares for a possible asset sell-off

October 2008: SemGroup officials fire Kivisto, the former CEO placed on leave in July. He and co-founders Wallace and Foxx are later sued by their former company.

December 2008: New Yorker John Catsimatidis goes public with plan to guide SemGroup out of bankruptcy, keep it intact and in Tulsa.

February 2009: Sem- Group sues Catsimatidis. Company mulls its own reorganization plan.

March: Terry ronan memo to SemGroup employees hints that the Tulsa company plans to emerge as public firm focused on SemCrude services in oil storage and transportation.

April: Bankruptcy examiner probe blames Kivisto for SemGroup collapse.

May 15: SemGroup files first reorganization plan and disclosure statement. The plan is amended three more times after objections by oil and gas producers.

June 25: Ronan and Catsimatidis meet face to face in New York to resolve differences over SemGroup reorganization effort.

July 20: Catsimatidis bows out as SemGroup suitor; two sides settle legal differences.

August 25: SemGroup files another reorganization plan, now offering producers more money, but still about 8 cents on the dollar.

Sept. 8: SemGroup names Norm Szydlowski to replace ronan as CEo once company emerges from bankruptcy. Presumptive Chief Financial officer Philip reedy is hired, then later drops out.

Sept. 24: U.S. Judge Brendan L. Shannon approves SemGroup plan for vote of creditors; mediated settlement offers producers up $337 million.

Oct. 21: Deadline for balloting to SemGroup creditor classes.

Monday: Judge confirms reorganization plan after creditors overwhelmingly approve terms.

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

Newspaper View Print this story

Comment

RSS

Bookmark

Reader Comments

Show: Most Recent Comment First

Add your comment

4 comments have been made on this story so far. Tell us what you think below!

Reporting Comments

If you see a comment that violates our terms and conditions, please help us by clicking the "Report this Comment" link next to a comment. That will alert the web staff to review the comment. Thank you. -- Web Editor Jason Collington

Some reader comments for this story were copied from "Judge approves SemGroup reorganization plan," which was published on 10/26/2009.

	Report Comment FUTURE WORLD, Tulsa (10/26/2009 9:28:34 PM) It's a nice gold one too. I feel for the investors who lost theri underwear in this deal.
	Report Comment CrippledShark, San Antonio (10/26/2009 9:26:38 PM) Well I'll be darn - you really can polish a turd.
	Report Comment Hawktalk, (10/27/2009 8:25:25 AM) Who were the SemGroup executives and how much did they get in bonuses?
	Report Comment merc_92, (10/28/2009 5:31:19 AM) I think this is great news for the region around Tulsa and the people who work for SemGroup. There are a lot of "keyboard cowboys" that have made a lot of wild acusations, bold statements and talked tough about the company. At the end of the day, however, this is most about the creditors getting what they can out of the bankruptcy (which it would apppear they have, based upon their voting of the plan) and as many jobs for the common folk being preserved as possible. Good luck and God bless to them moving forward.

Add Your Comment
In order to post a comment on this article, you must sign in to Tulsaworld.com. If you do not have a site account, you can create an account for free.