Smurfit-Stone shareholder's equity committee appointment motion denied

By Caroline Salls

Pittsburgh, Dec. 10 - Smurfit-Stone Container Corp. shareholder Caspian Capital Advisors' motion for appointment of an official committee of equity security holders was denied Thursday by the U.S. Bankruptcy Court for the District of Delaware.

In its motion, Caspian claimed no other constituency in the company's bankruptcy case can adequately represent Smurfit-Stone's shareholders.

"The holders of preferred stock and other shareholders cannot count on the official committee of unsecured creditors to serve their interests," Caspian said.

However, judge Brendan Linehan Shannon said in Thursday's ruling that "[the] record reflects that the movants have engaged able and experienced professionals, have vigorously participated in these cases to date and have identified numerous grounds upon which to challenge the debtors' recently filed joint plan and the accompanying disclosure statement."

As a result, the judge said the "appointment of an equity committee is not necessary to ensure adequate representation of the interests of shareholders."

Additionally, Caspian noted in its motion that the company's financial performance is steadily improving and will continue to recover, thereby increasing the distributable assets of its estates.

However, Shannon said Thursday that a valuation report submitted by Caspian "relies heavily on the industry pricing forecast of a single analyst," which the judge said is 10% to 35% higher than the consensus estimates of other industry analysts.

In addition, Shannon said the valuation methodology used in the report is dependent on projections of increased revenues in coming years as a result of the aggressive pricing forecast and "does not adequately consider or take into account likely cost increases in its projections."

According to Thursday's order, the secured and unsecured claims against Smurfit-Stone total at least $5.627 billion.

Smurfit-Stone, a Chicago-based manufacturer of paperboard and paper-based packaging, filed for bankruptcy on Jan. 26, 2009. Its Chapter 11 case number is 09-10235.

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