SemGroup parties complete settlement; SemGroup Energy receives loan default waiver

By Caroline Salls

Pittsburgh, April 8 - SemGroup Energy Partners, LP said it has completed a settlement with SemGroup, LP and has received a default waiver under its credit facility, according to a SemGroup Energy news release.

"The completion of the settlement and the [credit facility] amendment are significant accomplishments for SGLP," Kevin Foxx, chief executive officer and president of SemGroup Energy's general partner, said in the release.

"The completion of these transactions allows us to refocus our efforts on our crude oil and liquid asphalt cement terminalling, storage and transportation businesses independent of [SemGroup, LP].

"As a result of the settlement with the private company and the amendment with our lenders, we are now prepared to move forward in a positive manner as we continue to stabilize and strengthen our business."

As previously reported, the U.S. Bankruptcy Court for the District of Delaware approved the settlement term sheet on March 20 as part of SemGroup, LP's bankruptcy proceedings.

Since then, SemGroup Energy Partners said it and SemGroup have executed definitive documentation, in the form of a master agreement, effective March 31, that supersedes the term sheet and completes the settlement.

The master agreement was approved by the court on April 7.

Master agreement terms

Under the master agreement:

• SemGroup Energy transferred crude oil storage assets located in Kansas and Oklahoma to SemGroup, and these crude oil storage assets are part of SemGroup's proprietary Kansas crude oil transportation pipeline;

• SemGroup transferred ownership of 355,000 barrels of crude oil tank bottoms and line fill to SemGroup Energy to operate its crude oil tank storage and Oklahoma and Texas crude oil pipeline systems;

• SemGroup rejected the existing throughput agreement with SemGroup Energy, under which the latter provided crude oil gathering, transportation, terminalling and storage services for SemGroup at specified minimum levels;

• The SemGroup parties entered into a new throughput agreement under which SemGroup Energy will provide crude oil gathering, transportation, terminalling and storage services to SemGroup based on actual volumes transported at market rates;

• SemGroup transferred its asphalt assets that are connected to SemGroup Energy's existing 46 asphalt terminals to SemGroup Energy;

• SemGroup rejected the existing terminalling and storage agreement with SemGroup Energy under which the latter provided asphalt terminalling and storage services for SemGroup;

• The parties entered into a new terminalling agreement under which SemGroup Energy will provide asphalt terminalling and storage services for SemGroup's remaining asphalt inventory, which will be removed from SemGroup Energy's asphalt storage facilities no later than Oct. 31, 2009;

• SemGroup rejected an omnibus agreement under which it provided general and administrative and operational services for SemGroup Energy, which is in the process of replacing these general and administrative services and hiring employees to perform some of the operational services; and

• The parties entered into a shared services agreement under which SemGroup will provide crude oil operational services for SemGroup Energy.

Default waiver

In addition, SemGroup Energy entered into a consent, waiver and amendment to its credit agreement under which the lenders have consented to the settlement and waived all existing defaults on the credit agreement.

Under the agreement, the credit facility will mature on June 30.

According to the release, events of default occurred on the credit agreement that prohibited SemGroup Energy from borrowing under the facility to fund working capital needs or to pay distributions to its unitholders.

SemGroup Energy said it secured a default forbearance from the lenders in September 2008. The forbearance period was scheduled to expire on April 8.

Loan conversion

Under the amendment, $150 million of the company's outstanding revolving loans were converted to term loans and SemGroup Energy obtained the ability to borrow additional funds under its revolving credit facility.

SemGroup Energy said it is expected to have $433.1 million in outstanding borrowings under its credit facility following completion of the amendment, including $33.1 million under the revolver and $400 million under the term loan, with total unused credit availability and cash on hand of roughly $29 million.

The company said amounts outstanding under the revolver will never exceed $50 million and will bear interest at Libor plus 650 basis points, with a 300 bps Libor floor.

Payment requirements

Also, SemGroup Energy said the amendment requires it to make minimum quarterly amortization payments, mandatory prepayments under the revolver whenever cash on hand exceeds $15 million, mandatory prepayments with 100% of asset sale proceeds and annual prepayments with 50% of excess cash flow.

SemGroup Energy's ability to make acquisitions is also limited, and the company is prohibited from making equity distributions unless it maintains a leverage ratio below a specified maximum leverage threshold and other conditions.

SemGroup Energy is a Tulsa, Okla., provider of midstream services to the energy industry.

SemGroup, a Tulsa, Okla., privately held limited partnership that provides midstream services to North America's energy industry, filed for bankruptcy on July 22, 2008. Its Chapter 11 case number is 08-11525.

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