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WARREN Partnership from N.Y. joins in bid for WCI



Published: Tue, August 31, 2004 @ 12:00 a.m.



The newest bidders say their plan is best, includes long-term coke supply.

By CYNTHIA VINARSKY

VINDICATOR BUSINESS WRITER

AKRON -- Two competing buyers sparring for the right to own WCI Steel of Warren learned that a third contender is waiting to enter the ring.

WCI, with the support of its owner, Renco Group of New York, began a weeklong court battle Monday for ownership, vying against a competing group of secured lenders in U.S. Bankruptcy Court here.

Judge Marilyn Shea-Stonum has cleared her court docket for the week to hear testimony on the competing plans. She is expected make a decision on which plan offers the best alternative for bringing the steelmaker out of Chapter 11 bankruptcy protection as an operating company.

Surprising news of a third rival came near the end of the first day of testimony when Timothy O'Connor, a financial adviser for WCI, revealed that D.E. Shaw Laminar Portfolios L.L.C. had filed its own plan for reorganizing WCI.

It is unclear how the new proposal will affect the confirmation hearings for WCI and its bondholders.

Argument for plan

D.E. Shaw and MIC Capital, both based in New York, said in a press release that their joint plan for buying the company is superior to its competitors' because it includes a contract for coke, a critical raw material in steel production.

Alan Kestenbaum, chief executive of MIC Capital, said that the newest proposal "provides a more favorable alternative for the employees and the creditors of WCI" than the other competing plans.

D.E. Shaw is a specialized investment and technology development firm with $8 billion in capital. MIC Capital specializes in manufacturing, finance and metal trading.

O'Connor, a managing director for Jeffries & amp; Co. of New York, said D.E. Shaw was the only buyer that responded to his company's recent efforts to market WCI.

D.E. Shaw submitted a letter expressing an interest in buying the company's assets in July. WCI's independent board of directors considered the offer and rejected it, O'Connor said, believing that it fell short of the Renco/WCI reorganization plan.

Since then, however, the Shaw/MIC partnership has stepped up efforts to learn about WCI, he said, meeting with management, touring the facility with environmental lawyers, and studying WCI's collective bargaining agreement with the United Steelworkers of America.

"They are still very interested in its assets," O'Connor said.

Position in jeopardy

Meanwhile, Ed Caine, WCI's chief restructuring officer and former president, said the company's position with customers and suppliers is becoming tenuous as the bankruptcy process drags out.

"The 'trust-me' factor with our customers is wearing thin," he said, explaining that customers worry about negotiating contracts with WCI when its future is still unknown. If customers opt for agreements with other steelmakers, he said, it could take months or years to get them back.

As many as 300 employees who will qualify for retirement incentives in WCI's ratified agreement with USWA Local 1375 also have been forced to wait, he said. Just as importantly, the company must wait to initiate the work-rule changes under the contract that are expected to save millions in operating costs.

Caine said WCI has negotiated a five-year contract with Cleveland Cliffs to supply iron ore pellets, another essential raw material for steel production.

The company is negotiating with two domestic coke producers and four outside the United States, he said. He said the coke shortage has eased, and he believes WCI can get a guaranteed supply, but the price will likely vary from shipment to shipment.

vinarsky@vindy.com




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