WCI STEEL After rejection of plans, sides request a review

The Warren steelmaker and its parent company say the judge made errors.
WARREN -- Parties on both sides of the WCI Steel bankruptcy case want a review of a judge's rejection of both the steelmaker's and its noteholders' competing reorganization plans.
Their appeals seek a review by the U.S. District Court, Northern District of Ohio, of Judge Marilyn Shea-Stonum's decision.
The court will draw a judge to be assigned the appeal. It could be heard at a number of places, including Youngstown, Cleveland or Toledo.
WCI, which employs 1,750 workers, filed for Chapter 11 bankruptcy protection in September 2003.
The Warren steelmaker and its secured noteholders have competing reorganization plans but for a time were urged by the U.S. Bankruptcy Court Northern District of Ohio to work together on one plan.
Judge Shea-Stonum in December 2004 had given the parties time to reach a consensual plan for reorganizing the Warren steelmaker. She learned, however, that "no discussions had taken place between the competing plan proponents," her ruling states.
By February it "became apparent" the parties wouldn't reach a resolution, so the judge in April appointed an "enterprise valuation expert," Arthur Newman of The Blackstone Group.
She then made her ruling April 13 that neither plan could be confirmed, and lifted the moratorium on competing plans.
Judge's reasoning
She found that WCI's reorganization plan was "not feasible," and said it had an "overly conservative reckoning of enterprise value" of a reorganized company, and undervaluation of the plant, property and equipment. It didn't give enough value to the creditors.
The noteholders' plan, meanwhile, provided no ongoing basis for operation and there was no contract with the Steelworkers union.
In a flurry of court filings since late April, the appeals were filed by the secured noteholders; the official committee of unsecured creditors; the New York-based Renco Group, WCI's owner; and WCI Steel Inc., WCI Steel Production Services Inc., WCI Steel Metallurgical Services Inc., WCI Steel Sales L.P., Youngstown Sinter Co. and Niles Properties Inc.
The official committee of unsecured creditors was formed in 2003 and consists of United Steelworkers of America, Cleveland-Cliffs Inc., Pension Benefit Guaranty Corp., FirstEnergy Corp., Oglebay Norton Co. and Carmeuse North America.
Grounds for reversal?
Renco Group and WCI, for example, question whether the bankruptcy court committed reversible errors in its denial of confirmation of the third amended plan of reorganization of WCI Steel and its affiliated debtor subsidiaries.
They say a legal precedent established by the Supreme Court in 1999 mandates that the market, and not the bankruptcy court in a valuation hearing, determines whether a new value plan satisfies the requirements of the bankruptcy code.
"We think the Supreme Court says it's the market, and not judges, who should be determining value," said WCI's lawyer, G. Christopher Meyer of Squire, Sanders & amp; Dempsey LLP, Cleveland.
They also believe that the bankruptcy court erred in conducting an enterprise valuation and failed to credit the value of Renco's commitment that enabled the company to obtain a revised collective bargaining agreement and attain labor savings.
The secured creditors together hold $324 million of WCI's bonds secured by its property, plant and equipment, and also want to buy and operate the mill. The bondholders would invest an additional $40 million in WCI.
WCI's own reorganization plan would allow the steelmaker to emerge from bankruptcy protection, reorganize its debts and continue to operate under its present owner, Renco Group. WCI's current management team would remain largely intact under the plan, which has the backing of the United Steelworkers of America.