BANKRUPTCY HEARING Bondholders, owner differ on WCI's value

Hearings were expected to continue past today's planned deadline.
AKRON -- Just how much is WCI Steel worth?
Most of this week's testimony in U.S. Bankruptcy Court here has focused on that key question, one that could determine the next owner of the Mahoning Valley's third-largest industrial employer.
WCI and its multimillionaire owner Ira Rennert say the Warren steel mill is worth somewhere between $100 million and $110 million.
The creditor group that holds $324 million in bonds secured by WCI's plant property and equipment believe it's worth much more, somewhere between $300 million and $350 million.
Judge Marilyn Shea-Stonum will weigh the validity of the two, very different appraisals as she decides which of competing bidders should be awarded ownership of WCI.
Thomas Moers Mayer, an attorney for the bondholders, said the judge will be looking for a plan that treats creditors fairly. The WCI-Rennert plan falls short in that department and cannot be confirmed, he argued, because it repays the bondholders only a fraction of their investment.
Rennert has offered the bondholders $94 million in new notes, plus $18 million over five years starting in 2006, provided WCI's earnings remain strong.
Defends appraisal
John J. Connolly II, an officer and appraiser for Nationwide Consulting Co. in New Jersey, defended the appraisal his company did for WCI.
He said appraisers based their estimates on how much each piece of WCI's plant equipment could reasonably be sold for, a method he said he has used in every steel mill appraisal he's worked on in his 30 years of experience.
Connolly said he made only moderate increases in the appraisal this summer, despite WCI's improved performance and dramatic improvements in the steel market, because of the cyclical nature of the steel industry.
His company appraised the mill at $94 million in September 2003 and increased it to the $100 million to $110 million range in June.
Christopher Plummer, an analyst and managing director for Metal Strategies Inc. of West Chester, Pa., seemed to confirm Connolly's conservative appraisal.
He called the steel market "extremely volatile" and said the high steel prices contributing to WCI's good fortunes are not likely to last long-term.
Bondholders' assessment
Defending the bondholders' higher valuation of the company, Steven Strom of the investment banking firm CIBC World Markets argued that current prices and current performance are important factors in setting a company's value.
WCI made a profit five out of six months from February to July this year, and its $9.9 million loss in July was tied to the shutdown of the plant for several weeks while its blast furnace was relined. August results have not yet been released.
Testimony in the confirmation hearings was scheduled to end today, but attorneys for both sides were guessing Thursday that at least an additional day or two would be needed. Judge Shea-Stonum has said her docket is extremely busy, so attorneys said it may take a week or more to schedule the additional hearing time.
A third bidder, the New York-based partnership of D.E. Shaw and MIC Capital, also filed a proposal to buy the mill in bankruptcy court late last week.
That plan will be nothing but "an interesting footnote" in the case if the judge approves the WCI-Rennert or bondholders' plan, said G. Christopher Meyer, a WCI attorney. It could get more serious consideration, however, if the judge rejects the WCI and bondholder plans.

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