SemGroup's bankruptcy plan confirmed by court

* Confirmation ends contentious bankruptcy

* Secured lenders to own 95 percent of reorganized company

* Several legal fights remain unresolved

By Tom Hals

WILMINGTON, Del., Oct 26 - Energy marketing company SemGroup received court approval on Monday for its reorganization plan, clearing the way for it to exit bankruptcy after 15 months of feuding.

SemGroup, once the 14th-largest, privately held, U.S. company and parent of SemGroup Energy Partners LP <SGLP.PK>, collapsed last year after Chief Executive Thomas Kivisto lost billions of dollars on unauthorized sales of crude oil options.

More than 60 objections relating to the treatment of claims, insurance and other issues were either overruled or resolved before the end of the nearly 12-hour hearing, which required a video link to a second courtroom to accommodate the scores of attorneys.

"This has been a highly complex case," said SemGroup's attorney, Martin Sosland of Weil, Gotshal & Manges, noting there were 124 classes of creditors who voted on the plan, with 119 voting in favor.

"It's been vigorously contested from the start, at times it has seemed on each and every motion," he said.

The judge asked for minor revisions to the order confirming the plan, which is expected to become effective next month.

Under the reorganization plan, prebankruptcy secured lenders, who are owed about $3 billion, will receive 95 percent of the common stock. The lenders, which includes a group led by Bank of America <BAC.N> as administrative agent, will also receive about $520 million in cash and some debt.

SemGroup plans to borrow $500 million for working capital upon exiting bankruptcy.

The company also received approval for the restructuring of the Canadian operations on Monday.

In September, the company won the support of a committee representing thousands of suppliers, overcoming the last major group opposed to its reorganization. Delaware bankruptcy Judge Brendan Shannon called it the "most significant settlement in the plan."

The agreement to pay producers about $340 million was reached through mediation overseen by Delaware bankruptcy judge Kevin Gross and relied on using escrowed funds.

At least one party that objected to the plan, Manchester Securities Corp, said it planned to appeal and asked the judge to stay the confirmation of plan.

Shannon said he would not grant the stay "this evening."

Shannon approved at the start of Monday's hearing a settlement that released the $122 million which was placed into escrow, pending the outcome of separate disputes, by ConocoPhillips <COP.N>, BP <BP.L> and J Aron & Co, a unit of Goldman Sachs <GS.N>.

Shannon also approved an agreement between SemGroup and BNP Paribas <BNPP.PA>, Calyon, Fortis <FOR.BR>, Merrill Lynch and the Union Bank of California that cut their claims to $306.6 million from $376.8 million.

The slimmed down SemGroup will focus, as it did prior to bankruptcy, on gathering, marketing, storing, transporting and processing crude oil, natural gas and refined products.

The Tulsa, Oklahoma company said in court documents it projects it will report a profit of $18 million next year with a cash flow of $104.5 million.

SemGroup also projects revenue will double to $3.66 billion next year as its pipeline business returns to prebankruptcy levels.

The company said it plans to list its shares after the effective date of the confirmation. Its stock will be distributed across a several classes of creditors.

In an era of quick-rinse bankruptcies such as Chrysler and Eddie Bauer, SemGroup stands out for the length of the proceedings and their acrimony.

Professionals on the case billed SemGroup more than $125 million while arguing over everything from who had the right to propose a reorganization plan to the priority of claims.

At the close of the hearing, SemGroup attorney Sosland described the case as "the most litigious case of my career." That prompted Shannon to ask if he was choking back tears.

Confirmation will not end the legal wrangling, however. A trust was created as part of the reorganization to pay for pursuing outstanding lawsuits.

"There is no doubt significant litigation will follow the confirmation of this plan," said Shannon.

The judge appointed the former head of the Federal Bureau of Investigation, Louis Freeh, as an examiner in the case. Freeh reported that Kivisto and other executives contributed to the company's collapse by lying about its liquidity.

The case is In re SemCrude LP, U.S. Bankruptcy Court, District of Delaware, No 08-11525.