This makes it sound that they are screwed either way, whether the auction is successful or not. Maybe a slightly better outcome if the auction is successful. I would think there would be bidders for the asphalt assets as price of asphalt is projected to increase due to increase in demand due to the Obama stimulus plan and also asphalt supply is constrained (according to NuStar Energy).




Form 8-K for SEMGROUP ENERGY PARTNERS, L.P.

11-Feb-2009

Other Events

Item 8.01 Other Events.

As previously disclosed, SemGroup, L.P. (the "Private Company") and certain of its subsidiaries filed voluntary petitions (the "Bankruptcy Filings") for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), Case No. 08-11547-BLS, on July 22, 2008. None of SemGroup Energy Partners, L.P. (the "Partnership"), its general partner, the subsidiaries of the Partnership nor the subsidiaries of the general partner were party to the Bankruptcy Filings. However, the Partnership and its subsidiaries are party to various agreements with the Private Company and its subsidiaries, including subsidiaries that are debtors in the Bankruptcy Filings. Under a Terminalling and Storage Agreement (the "Terminalling Agreement"), the Partnership provides certain liquid asphalt cement terminalling and storage services to a subsidiary of Private Company that is a debtor in the Bankruptcy Filings.

On February 6, 2009, the Private Company filed a motion in the Bankruptcy Court requesting approval of the sale of the Private Company's asphalt related assets. The Private Company intends to solicit bids and hold an auction on February 23, 2008 for the sale of such assets. If the auction is successful, a hearing to approve the sale will be conducted on February 26, 2008. If the auction is not successful, the Private Company intends to immediately reject the Terminalling Agreement and begin liquidating its remaining asphalt inventory and wind down its asphalt business. If the contract is rejected, there is significant uncertainty as to the Partnership's revenues related to its asphalt assets and there is substantial risk that the Partnership's asphalt assets may be idle during 2009 and subsequent years. Without revenues from its asphalt assets, the Partnership may be unable to meet the covenants, including the minimum liquidity and minimum receipt requirements, under its forbearance agreement with its senior secured lenders pursuant to which such lenders have agreed to forbear from exercising their rights and remedies arising from the Partnership's events of default under its credit agreement. Even if the auction is successful, the Partnership may have to negotiate a new terminalling and storage contract with the buyer of the Private Company's asphalt assets and such agreement may not be on as favorable terms as the Terminalling Agreement.