WCI STEEL Lenders try to halt pension payment

The union says its pension plan is part of the company's contractual obligation.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- WCI Steel's secured lenders say the financially troubled Warren steelmaker can no longer afford to pay for its workers' pension plan.
The union representing the company's 1,400 hourly employees argues it can, and should under its collective bargaining agreement.
Judge William Bodoh's decision on the issue could have far-reaching implications for WCI workers and retirees. A hearing on the matter is set for 10:30 a.m. Friday in U.S. Bankruptcy Court in Youngstown.
Wilmington Trust Co. and 12 other lenders that hold WCI's $300 million in long-term bonds want Judge Bodoh to issue an injunction to stop the company from making a $5 million pension contribution due Nov. 15.
WCI is required to pay a quarterly minimum of $5 million toward its pension plan, which is underfunded by more than $100 million, according to the lenders' motion. WCI has stated that it will make its usual quarterly payment next week.
Arguing that WCI likely will not be able to repay all its creditors in full, the lenders are asking the judge to block WCI's payment of the pension contribution "to prevent valuable assets from being improperly distributed to the detriment of all creditors in this case."
Parent company
WCI differs from most other companies that have pension plans insured by the federal Pension Benefit Guaranty Corp., the lenders argue, because it has a parent company that can likely afford to pay its pension bill.
That parent company, New York-based Renco Group, and WCI's sister company AM General Inc., will ultimately be responsible to pay the steelmaker's pension costs if it cannot, the lenders argue.
AM General makes the profitable Hummer SUV for General Motors and the Humvee military vehicle, and published reports say owner Ira Rennert recently rejected a $750 million sales offer for the company. Renco Group also operates several other profitable companies in addition to WCI.
Even in the unlikely event that Renco or AM General could not pay, the lenders say, the PBGC would take over the plan.
Union's stance
Mike Rubicz, president of United Steelworkers of America Local 1375 representing hourly WCI employees, acknowledged that either Renco Group or AM General would be responsible for funding the pension plan if WCI won't pay.
But the union doesn't like the idea of Renco's or AM General's paying because the outcome is so uncertain.
"If the pensions were passed on to Renco, we're not sure if the same benefits would apply, or how long," he said.
"A lot of people are getting very nervous. This could have a profound effect on our retirees and our work force."
The union considers its retirement pension plan part of WCI's contractual obligation to its workers and retirees, Rubicz said.
The union has no contract with Renco or AM General.
"I won't speculate on what would happen. I just don't know what would happen," Rubicz said on the topic of a pension plan takeover by WCI's parent or a sister company. "I just don't know what would happen, and I feel it's better to avoid that whole situation."
Besides, Rubicz said, WCI's financial troubles will not be resolved by the $5 million it would save by forgoing the pension contribution.
WCI pays $30 million a year to the bondholders in interest alone, he noted, and finding a way to restructure that debt is one of the primary goals it must meet to emerge from Chapter 11 bankruptcy protection.
The company has also said it needs a substantial cash infusion from Renco and changes in its contract with the Steelworkers to make the mill profitable again.
Price increase
In a related matter, WCI cited increased global demand for its products as one of the reasons it is increasing its price on galvanized culvert coil, sheet and polymeric coated products by $20 per net ton, effective Jan 4.
The company said escalating raw material costs and high energy costs are also primary drivers behind the increase, announced Monday. It said further increases to reflect rising raw material costs are likely.
Rubicz said the price increase is a good sign and could help restore profitability, if sales continue to be strong. He said WCI has a strong order book through the end of December.
WCI, the only Mahoning Valley company still producing steel from raw material, filed for Chapter 11 bankruptcy protection in September, reporting assets of $352.5 million and debts of $643.3 million. The company is continuing to operate and has plans to restructure its debts and emerge from bankruptcy.
vinarsky@vindy.com