SemGroup subsidiary reaches pact

Published: July 29, 2008

TULSA -- A federal bankruptcy judge on Monday approved an agreement between a subsidiary of SemGroup LP and two other companies that will allow a 524-mile pipeline project to proceed.

As part of the pact signed off on by Delaware Bankruptcy Judge Brendan L. Shannon, SemCrude Pipeline will have to let another company oversee its work and allow access to records.

General Electric Capital, which is part of the pact, filed a petition last week alleging that SemCrude defaulted on the terms of a $120 million loan to build the pipeline from Platteville, Co., to storage terminals in Cushing.

The creditor accused SemCrude of taking $54 million out of the loan fund and sending it to the cash-poor parent company instead of spending it on the pipeline project.

General Electric Capital wanted PE-Pipeline Services to be in charge of the effort, but was blocked because SemCrude allegedly would not relinquish records and control of the pipeline construction, the petition alleged.

The three companies agreed on Monday that SemCrude would stay on in trying to finish the pipeline by the end of this year.

"During the interim period, SemCrude Pipeline shall continue to manage the day-to-day physical operations," the order read.

SemCrude must open all books, permits and contracts involved in the project and cannot void any contracts, pay expenses or buy or sell any assets without PE-Pipeline’s approval, according to the order.

Meanwhile, shares of publicly traded SemGroup Energy Partners closed at $7.98 per unit on the Nasdaq market Monday afternoon, nearly 6 percent higher than Friday’s close at $7.55, according to reports.

SemGroup, founded eight years ago, filed for Chapter 11 bankruptcy protection July 22 after losing at least $2.4 billion in oil futures trading, including $290 million by co-founder Tom Kivisto alone, according to reports.

SemGroup also owes more than $1 billion to other creditors, according to court records.

The Tulsa firm, which also operates under subsidiaries such as SemCrude and SemMaterials, plans to lay off around 276 employees, according to reports.

Copyright 2008 The Associated Press.

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