WCI requests court OK of changes to plan that increase secured noteholder distribution

By Caroline Salls

Pittsburgh, Nov. 16 - WCI Steel, Inc. requested approval of modifications to its second amended plan of reorganization that improves treatment of secured noteholder claims and provides several alternatives for holders of noteholder claims, according to a Wednesday filing with the U.S. Bankruptcy Court for the Northern District of Ohio.

Under the modified second plan, the new secured notes issued to secured noteholders increase to $97 million from $93 million, and the new secured notes to be issued to holders of noteholder claims correspondingly decrease to $18 million from $19 million.

In turn, the total amount of new secured notes to be issued under the plan will be $115 million rather than $112 million.

The noteholders also will be provided with an additional option if they choose not to recover 19.9% of common equity.

The option is a preferred interest in new WCI with a face amount of $20 million, a 14% cumulative dividend.

Also, no dividends may be paid to WCI parent The Renco Group, Inc. until the preferred interest has been redeemed in full.

Renco will have the option, at any time, to purchase the outstanding preferred interest for par plus accrued dividends.

In addition, new WCI will seek offers for purchase of the shares of deficiency notes for a period of up to four months after the plan effective date.

To the extent that the best available offer is for less than $15 million, new WCI will make a supplemental cash distribution to holders who elect to sell to bring the total cash consideration to their proportional share of $15 million.

Each holder may elect to sell all of its shares of deficiency holdings for cash or to retain their shares.

As previously reported, Renco has committed to provide $60 million to fund the plan plus assumption of more than $40 million in steelworkers' union pension liabilities.

Under the original second amended plan, the reorganized company would issue to Renco 80.1% of its new common interests in return for $45 million in cash and new subordinated notes in return for $15 million in cash over five years.

The reorganized company will be ignored for federal income tax purposes and will contribute its assets and some liabilities to new WCI in exchange for the preferred WCI interest, the 19.9% new common interest and 9% new secured notes.

The deficiency notes are 30-year promissory notes to be issued by the reorganized company and payable in annual payments based on available cash.

Under the plan, the company expects to obtain a $150 million exit facility from Congress.

The Warren, Ohio-based steel company filed for bankruptcy Sept. 16, 2003. Its Chapter 11 case number is 03-44662.

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