WCI STEEL Hearings open in bankruptcy court

Noteholders offered to adopt the labor contract, pension and retiree benefits.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
Two groups battling for control of WCI Steel remained resolute at the start of court hearings on the future of the Warren steelmaker.
Neither side was swayed as they both revealed sweetened offers in opening statements Monday before Judge Marilyn Shea-Stonum in U.S. Bankruptcy Court in Akron.
The judge has set aside six days for testimony this week and next week and is expected to decide sometime later who will control WCI when it emerges from bankruptcy court protection.
The Renco Group of New York, which owns WCI, revised its reorganization plan Sunday night to offer more money and more options for the noteholders, who are owed $324 million and want control of the company.
G. Christopher Meyer, a lawyer for WCI, said the steelmaker increased its proposed payment to the noteholders from $93 million to $97 million.
WCI's plan also calls for the noteholders to receive 19.9 percent ownership in the company. Meyer said the latest revision allows the noteholders to choose to receive that stake in common stock or in dividend-paying securities.
Noteholders' case
Thomas Moers Mayer, lawyer for the noteholders, said in his opening statement that the changes still would not allow the noteholders to participate adequately in the profits of WCI.
He reiterated the noteholders' contention that, as lenders, they should receive 100 percent ownership of the mill.
The only question is whether their plan for taking over the company is feasible, he said. Much of that uncertainty revolves around the lack of a labor contract between the United Steelworkers of America and the noteholders, he said.
Mayer stressed that the noteholders are prepared to take extra steps to resolve this question. The noteholders are willing to accept the collective bargaining agreement that the union has negotiated with WCI, assume the retirees' medical benefits and take on a pension obligation of nearly $50 million.
He said he will call a Steelworkers official to the stand who is expected to testify that the union will negotiate a contract with the noteholders if they are the owners. Mayer said he intends to show the judge that control by the noteholders will not lead to labor unrest or another bankruptcy of the company.
Steelworkers officials have said they would prefer that Renco retain ownership because Renco would be responsible for pensions if WCI fails, and Renco has other profitable businesses. If the noteholders take over, the deal could be structured so that nothing else is standing behind the pensions besides the federal Pension Benefit Guaranty Corp., union leaders said.
Estimated value
Testimony opened with Arthur Newman of the Blackstone Group placing the value of WCI at between $190 million and $245 million. The Blackstone Group was appointed by the court to value the steelmaker because the Renco and the noteholders haven't been able to agree on a value.
In opening statements, Meyer of WCI pointed out that conditions in the steel industry and at WCI have changed greatly. Judge Shea-Stonum held similar hearings last year but they ended in a deadlock when she didn't adopt either plan.
Meyer said that lately steel prices and sales are down, the auto industry is in a "shambles" and stocks of publicly owned steel companies have fallen.
The noteholders have placed the value of WCI at between $250 million and $350 million, and Mayer of the noteholders said WCI had a strong fiscal year despite the recent downturn in the market.
He said WCI is going to enter testimony that will be "like last year never happened. This company is visibly more valuable than it was."
He said WCI's debt on its line of credit from its debtor-in-possession financing has been reduced to "almost nothing" and the company had $82 million in earnings before interest, taxes, depreciation and amortization in the fiscal year that ended Oct. 31.
shilling@vindy.com