SemGroup Energy Partners Case 07/31/2008

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Company Name(s): 
SemGroup Energy Partners
Case Name: 
SemGroup Energy Partners Case 07/31/2008
Case Status: 
Lawsuit Filed
Case Status: 
Judgment Issued
Lawsuit Overview
Type of Lawsuit: 
Other
Date Filed: 
07/31/2008
Summary: 

The privately held Tulsa energy trading, storage and transportation SemGroup LP seeks to receive a $250 million loan package that would keep it operational a little while longer.
Several litigations have been filed by creditors and shareholders including allegations that subsidiaries defaulted on loans, used loan funds improperly or sold common stock earlier this year without warning investors about the cash shortage and debt load.
SemGroup Energy Partners was not part of the bankruptcy petition, but it reportedly gets about 80 percent of its revenue through dealings with its parent company, SemGroup L.P.On Thursday, July 31st, 2008 Delaware bankruptcy court Judge Brendan L. Shannon reportedly said that he will wait until Tuesday to decide whether SemGroup will receive a $250 million loan package ( debtor-in-possession financing). Judge Brendan L. Shannon said, he would delay ruling on the SemGroup L.P.’s request so that the company and its creditors could present more evidence. Judge Shannon said, that “This case has been moving very, very quickly,”, but that he needs time to consider also the creditors’ objections. Judge Shannon previously already approved the use of about $50 million in available cash collateral so SemGroup L.P. could pay employees, benefits and other vendors after it filed a petition July 22nd, 2008 for Chapter 11 bankruptcy protection. But according to officials money will only keep the SemGroup L.P. operational until Aug, 15th, 2008. SemGroup L.P employs about 400 people in Tulsa and about 2,000 worldwide.Reportedly the privately held energy trader and transporter SemGroup L.P collapsed after losing more than $2.4 billion in failed hedging on the oil futures market.
According to The Wall Street Journal, Alerian Capital Management and Manchester Securities agreed to lend $150 million to the energy group in June, shortly before it filed for bankruptcy and Bank of America agreed to lend the SemGroup L.P. $250 million, but some other creditors objected. They accused the SemGroup L.P. and co-founder and former Chief Executive Tom Kivisto, who was removed as SemGroup president, CEO and board member more than two weeks ago, of improper speculation on oil futures trading and not full disclosure about SemGroup L.P.’s financial situation.Mr. Kivisto, after moving with his wife to Tulsa in the early 1990s started his own oil marketing company called Eaglwing Trading. In 2000, he secured a $65-million loan from the Bank of Oklahoma and launched SemGroup. With the demise of Enron Corp. and a slump in the energy sector Mr. Kivisto had the opportunity to snap up assets from distressed companies. Reportedly over the next eight years, SemGroup bought nearly 50 companies and expanded into Canada, where it became a major, and highly respected, oil and gas trader in Calgary. Traders estimate SemCanada, SemGroup’s Canadian subsidiary, was one of the 10 largest traders of Canadian natural gas. By 2005, SemGroup’s annual revenue reached more than $20-billion. In July 2007, SemGroup went public on the Nasdaq Stock Market and one year later, on July 17th, 2008 , the limited partnership with more than $2.4 billion in debt announced that it was considering bankruptcy protection, which caused a decease of the units from $22 two weeks ago to $8.30.Tom Kivisto said “Tulsa has always rebounded well when bad things happen to one of its corporate citizens,” and “With an investigation under way, I cannot answer any of the pressing questions or comment on speculations regarding the SemGroup situation,” attempted to reassure employees of the embattled company as he said”as the facts and truths surrounding this chain of events are revealed, the SemGroup employees will regain their trust in what they initially believed”