September 5, 2008

Delaware Bankruptcy Judge Lets SemGroup Use Up to $4.8M to Pay Contractors

By Marie Price

A Delaware bankruptcy judge has authorized SemGroup LP to use up to $4.8 million to pay construction contractors for pre-petition claims.

The parent company, which filed for Chapter 11 bankruptcy on July 22 along with 24 subsidiaries, has also reached an agreement with publicly traded SemGroup Energy Partners LP (SGLP).

After a hearing Tuesday, Judge Brendan Shannon issued an order allowing the bankrupt parent to pay the construction contractors.

Shannon's order provides that payment may be conditioned on the agreement of individual contractors to continue to supply materials or render services to the debtor companies through completion of work on applicable projects.

Part of Tuesday's hearing was devoted to a dispute between the parent company and SGLP, which is not among the bankruptcy debtors.

SGLP had asked the court for adequate protection in the bankruptcy case.

In its filing, SGLP said that SemGroup wanted it to provide more than two months of credit on asphalt and oil agreements, but was only offering a one-month letter of credit on one of the agreements, subject to certain concessions from SGLP.

SGLP told the court that SemGroup had failed to pay for more than $15 million in pre-petition services. SemGroup pegged its net obligation to SGLP at about $4.6 million.

SemGroup Energy Partners also said that the debtor companies' shaky financial condition resulted in SGLP's default on a credit agreement.

Before the bankruptcy filing, between 80 percent and 90 percent of SGLP's revenues came from SemGroup, exclusive of fuel and power.

Under the new agreement, SemGroup will pay SGLP for asphalt storage services and for oil storage. SemGroup also agreed to pay some pre-petition and current utility costs and office expenses, according to The Associated Press.

On Wednesday, Belgium-Netherlands-based Fortis Bank and Fortis Capital Corp. told the court that SemGroup owes about $303.8 million under a SemCrude credit agreement, including amounts owed in connection with Fortis lender swap obligations.

Fortis Capital Corp. said it is a lender under credit agreements to the tune of $59.57 million as a working capital lender and $20 million as a revolving credit lender, as well as about $224.25 million in connection with Fortis lender swap obligations.

Originally published by Marie Price.

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