Hearings on hold; new deal proposed

Noteholders agreed to keep WCI executives and reached a labor pact with the union.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
WARREN -- The noteholders for WCI Steel hope all parties in the bankruptcy case will back their latest effort to take over the reorganized company.
Court hearings designed to select either WCI's parent company or the noteholders as the owner of the reorganized company have been recessed so the new plan can be assessed.
Larry Clark, an official with one of the noteholders, said he expects all parties involved in the case -- including WCI's parent company and the United Steelworkers of America -- to try to hammer out a joint plan in the next few weeks.
A hearing in U.S. Bankruptcy Court in Akron is scheduled for Dec. 16 to update Judge Marilyn Shea-Stonum on the progress.
Key parts of the new effort were announced Thursday. The noteholders reached a tentative labor contract with the union, revised their financial offer and proposed retaining WCI senior executives.
Patrick Tatom, WCI president and chief executive, stopped short of saying the steelmaker supports creating a unified reorganization plan. However, he said WCI management will review the noteholders' revisions and make a recommendation to the steelmaker's board of directors.
The two sides have tried to work out a deal before, so it remains to be seen if they can get together this time, said Mike Rubicz, president of Steelworkers Local 1375. For example, the Renco Group of New York, WCI's parent, could decide instead to improve its offer, as it has done in the past, he said.
Union must approve
Also, Local 1375 must approve the labor deal reached with the noteholders. Rubicz said passage isn't certain because some members aren't happy with the labor deal with WCI that this agreement is based on.
Rubicz said pay and work rules in the two deals are expected to be similar. Clark said both labor deals include buyouts designed to trim the union's membership of 1,300.
The noteholders plan to make a $50 million cash investment in WCI, for which they would receive preferred stock.
Also, they would exchange $300 million in notes for $100 million in new notes, which would carry lower interest rates. The noteholders would receive a lien on steel-making assets and substantially all of the stock in the reorganized company.
Clark said the terms would help WCI operate successfully because both its debt and interest rates would be reduced.
Also, the noteholders have obtained a commitment for a $150 million line of credit from Citigroup Global Markets.
Management team
The noteholders previously put forth their own management team if they were selected as the winning bidder. Now, however, the noteholders have agreed to use the current WCI management team, with one addition, Clark said. Cynthia Bezik, former chief financial officer at Cleveland-Cliffs, is to take a role as a senior financial executive.
Clark is vice president of Harbert Distressed Investment Master Fund Ltd., which would be the largest shareholder in the reorganized company. Clark declined to reveal how much of the debt his company holds. The New York-based company manages $3 billion in investments.
The noteholders and WCI have tried in the past to reach a compromise. Last year, the judge said she wasn't satisfied with either company's reorganization plan and ordered that they try to work out their differences.
When that failed, both companies revised their plans and confirmation hearings were set for this week and next week. Renco Group had proposed retaining a controlling stake in the company. It proposed investing $40 million in the business and giving the noteholders $93 million and about 20 percent ownership.
shilling@vindy.com