Ruling allows WCI bond holders to sue over pension funding

The lenders want WCI's wealthy parent company to fund the pension.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- A federal bankruptcy court judge has given WCI Steel's bond holders the right to file a lawsuit to try to stop the beleaguered company from funneling millions of dollars into its underfunded pension plan.
Judge William Bodoh ruled that the Wilmington Trust Co. and 12 other secured lenders can use legal means to try to get back the $5 million payment WCI made into its pension plan last month. Another similar payment is due in February for the plan, which is underfunded by more than $100 million.
The decision is one of the last Judge Bodoh will make because he plans to retire Friday from his Youngstown bankruptcy court position. A new judge, not yet named, will hear the bond holders' lawsuit if one is filed.
The lenders, which hold more than $300 million of WCI's long-term bonds, tried unsuccessfully to block the November payment by asking the judge for an injunction. Judge Bodoh refused to grant the injunction, saying the bond holders had other remedies under the law.
Parent company
Thomas Moers Mayer, an attorney for the bond holders, has argued that WCI cannot afford to pay its pension costs and that its wealthy parent company, New York-based Renco Group, is ultimately responsible for the payments by law.
Renco owns several other companies, including AM General in South Bend, Ind., which produces the profitable Hummer vehicles for General Motors.
The lenders have alleged that the $5 million pension payments and other future payments will hurt WCI and make it harder for the steel company to reorganize and emerge from Chapter 11 bankruptcy.
They also argue that the company had a conflict of interest when it decided to pay the pension costs because, by doing so, it shielded its parent company from an obligation to make the payments.
Judge Bodoh wrote that Renco owns more than 80 percent of WCI's equity and is liable for any underfunding of the pension plan. His ruling did not address the merits of the bond holders' arguments, however.
Responses
WCI spokesman Tim Roberts declined to comment on the decision, saying he had just learned about it and wanted to confer with other company officials. Adam Rogoff, a New York City attorney representing Renco, also refused to comment, saying his clients were unavailable because of the holidays.
United Steelworkers of America, which represents the 1,400 WCI employees and WCI retirees covered by the pension plan, argued in court two weeks ago that the company is obligated to make the pension payments under its collective bargaining agreement with the union.
Mike Rubicz, president of USW Local 1375, could not be reached to comment Tuesday.
Renco and the Pension Benefit Guaranty Corp., a federal agency that guarantees payment of basic benefits for 35,000 private-sector defined-benefit pension plans, also argued in court that WCI is legally bound to pay its pension costs.
WCI, a major Mahoning Valley employer with about 1,800 workers, filed for Chapter 11 bankruptcy protection in September. Officials have said they plan to reorganize and emerge from bankruptcy protection by June.
vinarsky@vindy.com