U.S. BANKRUPTCY COURT WCI Steel wins decision on pension payments

The ruling could cost the bondholders votes as they wrestle for control of WCI.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
AKRON -- WCI Steel won what one official called a "very significant" victory over a rival group of bondholders vying to buy the company out of bankruptcy.
Judge Marilyn Shea-Stonum of the United States Bankruptcy Court in Akron ruled Tuesday that WCI was legally right to continue making $5 million quarterly payments into its employee pension plan, even after the company filed for Chapter 11 bankruptcy protection last September.
The bondholder group, which holds $324 million of WCI's secured debt, filed a lawsuit asking that the payments be stopped and that about $18 million of the payments be returned to company coffers.
They argued that WCI's parent company, New York-based Renco Group, was ultimately responsible for the pension costs and that WCI could not afford to pay them.
Judge Shea-Stonum's ruling is important, said Edward Caine, WCI's chief restructuring officer and former president, because the bondholders planned to divide that $18 million among some of WCI's creditors as part of its reorganization plan.
Caine said the bondholders would have to revise their plan, knowing the $18 million won't be available.
The change would likely reduce the amount they can offer to repay the creditors, and that could cost the bondholders some votes when the plans go out to creditors in the mail in the coming weeks.
"It's a real blow to them, but it's good news for us," Caine said. "The judge said everything we did was perfectly legal."
Union reaction
Gary Steinbeck, a District 1 official for the United Steelworkers of America, said the union was elated about the decision. Mike Rubicz, president of USWA Local 1375, said it proved WCI's actions were "above board."
Lawyers representing the bondholders and WCI were in court all day Tuesday, hammering out details of the competing plans creditors will vote on in the coming weeks, and work was to continue today. Any creditor not receiving 100 percent of what it is owed will have the right to vote.
WCI said in a court filling that it will have to make another pension payment July 15, this time for $3.8 million, bringing the 2002-03 plan year total to $25.3 million. The plan year is Nov. 1 to Oct. 31, the same as WCI's fiscal year.
The company said it contributed $19.86 million for 2000-01 and $26.47 million for the 2001-02 plan year.
Proposal
In a related matter, Rubicz said USWA will begin mailing summaries of a new bargaining agreement proposal to Local 1375 members June 15. The tentative pact with WCI is a crucial part of the company's reorganization plan.
Informational meetings for members are scheduled for 10 a.m. and 4 p.m. June 28 at the local's union hall in Warren, and departmental meetings will be held daily after that, with a membership vote set for July 15.
Attorneys for WCI and the bondholders resolved several differences and objections during the daylong hearing in bankruptcy court Tuesday.
For example, both sides agreed to add more information in the plans on how environmental issues at WCI would be addressed under their reorganization strategy. That seemed to satisfy government attorneys representing the U.S. Environmental Protection Agency, which had filed objections to both plans.
The bondholders agreed to have statements by the USWA added to their plan to resolve union objections. The plan already states that the bondholders would employ USWA members and would negotiate a contract, if they win control of the company, "that will be no worse for USWA members" than the tentative agreement the union has reached with the company.
A USWA attorney said the union believes it would be "very difficult" for the bondholders to reach an agreement with Local 1375, and a successorship clause in the USWA contract would prohibit them from operating the mill without a union contract.
vinarsky@vindy.com