BANKRUPTCY COURT Lenders battle with WCI over reorganization plan

A judge will decide which framework will be used for the steelmaker's comeback.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- WCI Steel's secured bondholders say they have a reorganization plan that would allow the troubled steel company to emerge from bankruptcy on schedule in June, and they want a federal bankruptcy court judge to let them file it.
WCI insists it has a viable reorganization plan in the works, however, and says the court can trust the company to complete it on schedule.
Under bankruptcy law, WCI had the exclusive right to submit a reorganization plan for 120 days after its Chapter 11 bankruptcy filing in September 2003, and a federal bankruptcy judge later agreed to extend that exclusivity period through mid-May.
Wilmington Trust Co., trustee for the lenders, which hold $300 million of WCI's long-term notes, however, filed a motion this week asking bankruptcy Judge Marilyn Shea-Stonum to terminate that agreement.
They argue that the company is behind schedule in submitting a plan and that the Wilmington Trust plan is the only one available that will allow WCI to follow its own timetable for emerging from bankruptcy.
Response
Not so, said Tim Roberts, a WCI spokesman.
He argued the company is making progress on its reorganization plan and expects to have it ready on or before its exclusivity rights expire May 15.
"While the bondholders certainly have the right to make this motion, we believe we're making significant progress and there's no reason for the court to grant the motion," Roberts said.
Company officials have said that they want to emerge in June so that they can go forward with a critical, $13 million relining of its blast furnace and can install another necessary $25 million furnace upgrade.
Details of the lenders' plan have not been released, but an attorney representing WCI has said that all interested parties, including the lenders, have been looking at continuing mill operations, not liquidation.
A hearing on the motion will likely be scheduled in April in the federal bankruptcy court in Akron.
Defending their motion, the lenders called WCI's efforts to find a buyer "half-hearted" and allege the business profile the company put together for potential bidders is "based on financial data calculated to deter buyers rather than attract them."
Roberts would not comment on that claim, except to say he believes WCI has met its fiduciary duties. "That's an issue the court will have to decide," he said.
Wilmington Trust Co. said it has been "in active discussions" with the United Steelworkers of America, which represents hourly workers at WCI, on both a plan and a collective bargaining agreement.
"The USWA has authorized the secured note holders to state ... that the USWA supports termination of the debtors' exclusive period," the motion states.
Mike Rubicz, president of USWA local 1375, said he could not comment on the union's talks with the bondholders or its talks with Renco Group, WCI's New York-based owner.
"I'm just pleased to hear that more than one buyer is interested in WCI," Rubicz said. "That is a positive thing. I think it's good for the workers, the retirees and the community."
Working capital
The note holders have sufficient equity capital to fully fund their plan, the motion states, and have three lending institutions lined up which are ready to provide full working capital for the mill.
Wilmington Trust Co. is the same entity that filed a lawsuit against WCI last fall to try to stop the beleaguered company from funneling millions of dollars into its underfunded pension plan. WCI pays about $5 million a quarter to the plan, which is underfunded by more than $100 million.
The lender group is arguing that WCI cannot afford to pay its pension debts and that its wealthy parent company, Renco, is ultimately responsible for the bill.
vinarsky@vindy.com