U.S. BANKRUPTCY COURT Judge approves loan package to keep WCI Steel afloat

The company said its first choice lender will make more cash available.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- Union leaders representing about 1,400 workers at WCI Steel said they were relieved and encouraged Tuesday when a U.S. bankruptcy court judge approved a loan package to keep the struggling steelmaker operating.
Two competing lenders had offered to provide financing for WCI after it filed for Chapter 11 bankruptcy protection in September.
Judge William Bodoh approved WCI's first choice, a $100 million loan package from a group of lenders led by Congress Financial Corp. and Bank of America.
WCI said in court documents supporting the Congress financing plan that it makes $16.17 million more cash available and at lower fees than the competing offer from Harbert Management Corp. Harbert is the largest stake-holder in WCI's $300 million long-term bond debt.
"This is great news because it gives us the opportunity to move forward and ultimately to work toward coming out of bankruptcy," said Gary Steinbeck, a subdistrict representative for United Steelworkers of America.
Mike Rubicz, president of USWA Local 1375, said the loan package makes him feel more comfortable about the mill's position. WCI has a strong order book through December, he said, and now it has the funds it needs to meet those orders.
Debtor in possession
The arrangement, known as debtor in possession or DIP financing, aims to give a struggling company capital to continue operating while it works to reorganize its debts. Lenders are willing to offer DIP financing because, under bankruptcy law, the debtor company must repay it before it pays back other creditors.
WCI's secured note holders filed an objection to the Congress financing plan, but the company's attorneys worked out some changes to satisfy the note holders.
The Congress lenders agreed to eliminate a requirement that WCI keep at least $5 million in the DIP fund as a cushion, and they changed a clause that would have put the company in default if it fails to pay a $5 million pension payment due Nov. 15.
WCI said it wants to pay the pension payment, but attorneys representing the bondholders have said that they will seek an injunction to stop the payment. They argue that WCI's parent company, New York-based Renco Group, is ultimately responsible for paying the pension costs if WCI can't afford to pay.
U.S. Steel motion denied
In another matter, Judge Bodoh rejected a U.S. Steel Corp. motion that would have forced WCI to pay immediately for $1.7 million in coke the Warren steelmaker used in the 10 days before its bankruptcy filing. Instead he approved a procedure WCI proposed that the company will use to investigate and determine the legitimacy of all its suppliers' claims.
Christine Murphy Pierpont, an attorney for WCI, argued that 40 suppliers have filed claims against the company, asking to either reclaim the products they delivered or to be paid immediately. Hearing each of those cases separately would be difficult and expensive, she argued.
Charles Rae, senior commercial counsel for U.S. Steel, said his company has continued to provide about $3.9 million a month worth of coke to WCI for its steel production. He said WCI has been paying its bills, except for the coke delivered just before the Chapter 11 filing.
vinarsky@vindy.com