WCI STEEL Creditors patient despite losses

Some creditors have faced bankruptcies with other steel customers in the past.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
WARREN --WCI Steel owes them tens of thousands of dollars. You might expect they'd be spitting mad at the Warren steelmaker for allowing their bills to go unpaid.
But surprising, some regional businesses WCI listed among its largest unsecured creditors in a Chapter 11 bankruptcy filing earlier this month are complimenting the steel mill and its managers.
Those who are talking paint a picture of a dependable customer that always paid its bills on time. They say they'll do what they can to see the steelmaker emerge successfully from bankruptcy protection.
WCI, the region's third-largest industrial employer with a work force of about 1,800, included a list of its 40 largest unsecured creditors in documents it filed in federal bankruptcy court. About a quarter of them are from the Mahoning and Shenango valleys.
Unsecured creditors are less likely to receive full payment than other lenders in a Chapter 11 case because their debts are not secured by a lien or mortgage. Unsecured creditors generally base their decision to extend credit to the company solely on their belief in its ability to pay.
Secured creditors
Secured creditors get priority when the bills are paid.
In WCI's case, for example, secured creditors include the lenders who hold $300 million in bonds WCI issued to raise money for capital improvements in the 1990s. The bonds are secured by a lien on the mill property, plant and equipment.
The company also has a $100 million revolving credit account that is secured by WCI's inventory and receivables.
Familiar situation
As a manufacturer and servicer of steel mill equipment, Jack Piatt II said steelmaker bankruptcies are a familiar problem for his company, Millcraft-SMS Services in Washington, Pa. WCI owes the company $137,502, according to its unsecured creditor list.
"Frankly, we've been through this a number of times," Piatt said.
Millcraft-SMS manufactured and installed equipment as part of WCI's capital improvement project 12 years ago and has continued to work there maintaining the equipment.
"While it's terrible for us, we're continuing to supply equipment to WCI," Piatt said. "We'll stay with them through the problem. I think WCI will make it. They're a good company, and they'll have a fresh start."
Dave Collins, president of Diamond Steel Construction on Raub Avenue, Youngstown, is also accustomed to being left with unpaid bills by steel companies.
He's been a creditor in bankruptcies with Republic Steel, LTV Steel and CSC Ltd., and now WCI owes his company about $117,500.
Collins said the debt isn't enough to hurt Diamond Steel significantly, but he's pulling for WCI to make it out of bankruptcy for other reasons.
"We've worked for them since the Republic Steel days," he said. "We feel bad for them. They're personal friends of ours."
WCI was formed in 1988 on a site previously operated by LTV Steel and Republic Steel. Diamond has had contracts to maintain buildings at the mill for decades, Collins said, and recently worked on relining the WCI blast furnace.
Collins said he knew WCI was struggling, but he continued working at the mill because he didn't want to add to the company's problems. Diamond still has employees at the plant.
FirstEnergy
FirstEnergy's Youngstown office, listed as WCI's fourth largest unsecured creditor, is owed $1.45 million according to court records, but utility company officials believe the figure is higher, closer to $2.5 million.
David Poeppelmeier, a FirstEnergy spokesman, said the difference could be related to additional electricity usage between the company's last billing and the date of the bankruptcy filing.
WCI had a long history of paying its huge electric bills promptly, said Mark Durbin, also a spokesman for the utility. He said the company's monthly bill generally averaged between $1.3 million and $1.5 million -- it is FirstEnergy's largest customer in its eastern region, which includes Youngstown and Warren.
"They've been great customers," Durbin said.
As a large quantity user, he said, FirstEnergy gave the steel company a discounted rate.
WCI contacted the electric company about six months ago to advise that it had encountered some financial problems.
"If a customer has a history of late payments there are things you can do to protect yourself, require deposits, etc.," he said. "Even with the warning, there was nothing we could do legally in WCI's case. They were good customers."
City of Warren
David Griffing, Warren auditor, said city officials are still trying to pin down what WCI owes. Court records list Warren as the company's 13th largest unsecured creditor, owed $388,792.
Griffing said the company was up-to-date on its income tax and owes just one monthly bill for both water and sewer service, a total of about $180,000.
"They're not in arrears, as far as I can determine," he said.
Although it's located within blocks of the downtown, Warren Mayor Hank Angelo said most of WCI is in Howland and Warren townships. Only one office building on Pine Avenue is in the city.
Still, the mill has a major impact on the city -- it brings in $300,000 a year in income tax, $600,000 for sewer use, $1.5 million for water and $1.05 million for Warren City Schools.
Angelo said city officials are eager to work with WCI to help the company's effort to emerge from bankruptcy. He's proposing a Joint Economic Development District as one way to help by discounting water and sewer rates for the mill.
"Our goal is job retention," Angelo said. "We'll work with them whatever way possible."
vinarsky@vindy.com
XContributor: Don Shilling, Vindicator business editor.