Private equity firm buys stake in BlueKnight
10.26.2010 - NEWS
October 25, 2010 [Tulsa World] - A private equity firm has purchased half of Blueknight Energy Partners LP’s general partner control in a deal that erases the Tulsa-based midstream oil and asphalt company’s debtload and opens access to new loan facilities totaling up to $275 million, according to reports Monday.

The ownership entity — CB-Blueknight LLC, an affiliate of Charlesbank Capital Partners LLC — will share general partner control equally with Vitol Inc.

Boston-based Charlesbank investment group was formed in 1991 and has invested more than $2 billion in dozens of companies, according to its website.

“We are impressed with the quality and depth of Blueknight’s management team and are delighted to partner with Vitol to continue the process of repositioning the company,” Charlesbank Managing Director Jon Biotti said in a statement.

Publicly traded Blueknight was known as SemGroup Energy Partners LP until last year.

“We look forward to a new chapter in Blueknight’s history,” CEO James Dyer said in a written statement. “Blueknight is positioned to take advantage of new investment opportunities with a focus on building unitholder value rather than dealing with legacy debt issues.”

Under the deal, Blueknight benefits from an all-new credit agreement including $200 million term loan facility and $75 million revolving loan facility, the company reported.

In exchange, the agreement issues 21.54 million preferred units to Vitol and Charlesbank at $6.50 per unit, according to the release. The partners also receive $50 million in subordinated debentures which can be converted into preferred units by Dec. 31, 2011.

Blueknight’s second-quarter earnings report, released in August, estimated $391.1 million in outstanding debt on a term loan facility and another $28.8 million on a revolver. Blueknight paid $13.54 million in interest expenses in the second quarter alone, according to reports.

Onetime privately held energy transportation giant SemGroup LP spun off terminal, pipeline and other transport assets to form SemGroup Energy Partners in 2007 and take it public later that year. By summer 2008, however, SemGroup LP collapsed in a free-fall brought on by more than $2.4 billion in margin losses on failed oil futures trades. It lost control of the partnership through a loan default with hedge funds Manchester Securities and Alerian Capital Management.

SemGroup Energy Partners avoided the bankruptcy fate of its parent company, which since emerged from Chapter 11 as SemGroup Corp. The subsidiary’s own challenges, however, intensified with a loss of revenues from the parent SemGroup’s pipeline throughput deal previously worth more than $100 million annually.

The public SemGroup Energy Partners survived with waiver help from its lender group, despite being delisted by the Nasdaq Stock Market. Vitol Inc. stepped in last year to buy a controlling interest in the general partner and changed the name to Blueknight Energy Partners.

The previous SemGroup subsidiary was headed by CEO Kevin Foxx, a co-founder criticized by investigators for his alleged role in the parent company’s downfall. Dyer and new executive leaders stepped in last year to run Blueknight.

Also Monday, Blueknight executives turned a communication corner by announcing a conference call scheduled Wednesday afternoon to discuss the refinancing. The conference call will be Blueknight’s first since SemGroup Energy Partners held one more than two years ago.

Blueknight owns and operates more than 13 million barrels in crude oil storage and terminal capacity. The company also has 1,300 miles of crude oil pipeline and 7.2 million barrels’ worth of asphalt and residual fuels storage.

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