Creditors, parent company vie for company's operating plan
Creditors' votes were split between competing plans to restart the company.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
WARREN -- WCI Steel's 9-month-old bankruptcy case reaches a pivotal point in court today, the first of three days set aside to confirm a new operating plan for the company.
Federal Judge Marilyn Shea-Stonum was to hear attorneys argue for two competing plans: one financed by WCI's parent company, New York-based Renco Group, the other backed by a group of creditors holding $324 million in WCI bonds secured by its plant, property and equipment.
Both plans call for the Warren steel mill to emerge from Chapter 11 bankruptcy protection and continue operating.
Testimony was set to begin at 12:30 p.m. in United States Bankruptcy Court in Akron.
WCI's hundreds of creditors voted by mail on the rival plans, but WCI attorney G. Christopher Meyer said the vote was split.
A unanimous vote by all creditor classes for either plan would have simplified the judge's choice slightly, he said, but creditor support is only one of more than 20 legal criteria a plan must meet to be confirmed under federal bankruptcy law.
Attorneys for the company and the secured creditors have both argued in motions filed with the court that their rival's plan does not meet those legal standards and cannot be confirmed.
"Ultimately, it will be the judge's decision," Meyer said.
He said the secured creditors voted overwhelmingly for their own plan, while WCI won the support of two smaller claim classes.
The secured creditors won at least two-thirds of the votes in a fourth class, he said, based on the dollar value owed, but WCI's plan won more individual votes in that class. Bankruptcy law requires that a plan win two-thirds of the dollar value and more than half in number of claims to win a class.
Two other creditor classes did not get to vote because they are considered "unimpaired," meaning they will be paid in full or their contractual rights will be unchanged under the reorganization plans.
Creditors who would be paid less than they are owed are considered "impaired" and had the right to vote.
The secured bond holders would be paid $94 million in new company notes under WCI's plan, while Renco would invest an additional $35 million in the business and would retain 100 percent of the company stock.
Under their competing plan, the bond holders would invest $50 million in the company and would get $100 million in new notes, along with complete control of the company stock.
The financial picture has been improving lately for WCI. The company completed its fifth consecutive profitable month in June, earning $3.2 million on sales of $61 million.
Profits were down two-thirds from May, however, when the company reported earnings of $10.5 million on sales of $59.3 million.
That decrease was largely related to a recent 6-week, $15.3 million blast furnace relining which resulted in the gradual shutdown of the mill, said Tim Roberts, a WCI spokesman. The relining was completed Friday. He said raw material costs have also been rising.