SemGroup Rushed to Raise $718 Million Pre-Bankruptcy (Update1)
By Linda Sandler and Robert Tuttle
Aug. 13 (Bloomberg) -- SemGroup LP, the pipeline and energy-storage company that went bankrupt last month, rushed to raise $718 million to fund money-losing commodity trades before going bust.
The cash was obtained in five transactions with affiliates including the swap of an asphalt business with the company's publicly traded subsidiary, SemGroup Energy Partners LP, and loans from two hedge funds and General Electric Capital Corp., according to regulatory filings and shareholder and creditor lawsuits. The hedge-fund borrowings were secured with the company's SemGroup Energy stake, while GE Capital's loan to a pipeline project ended up with the parent company.
``Massive'' margin calls on trades in energy futures and options sank the Tulsa, Oklahoma-based company, according to its bankruptcy filings. Rising prices forced SemGroup to put up $1.96 billion in the first quarter to cover its bets, more than double the amount it needed a year earlier. While the company said the trading was essential to its business, lenders said it may have been improperly speculating, filings show.
``It sounds like they were desperate for cash,'' said Craig Pirrong, director of energy markets at the University of Houston Global Energy Management Institute. ``Any transfer of cash or assets within a period of time prior to bankruptcy is potentially a preference that creditors could challenge. This is headed for potentially nasty bankruptcy proceedings.''
Yesterday we flagged a drink company that borrowed almost $300 million 60 days before going bankrupt....today and energy company $700 million before going bust.......any thoughts about tommorow????