WCI, Renco file issues on appeal of court refusal to confirm plan

By Caroline Salls

Pittsburgh, May 3 - WCI Steel, Inc. and its parent Renco Group Inc. submitted their statements on issues to be presented in the appeal of the U.S. Bankruptcy Court for the Northern District of Ohio's decision to refuse confirmation of WCI's plan of reorganization.

In separate filings Monday, WCI and Renco said issues of appeal include:

* Whether the court was wrong to deny confirmation because it made its own valuation of the equity interest. WCI and Renco cited the precedent established in Bank of America NT & SA's case against North LaSalle Street Partnership. In line with that case, they had already established the value by market methods by terminating the exclusivity and marketing the company to potential buyers;

* Whether the court failed to recognize that the termination of exclusivity satisfies North LaSalle's market testing requirement;

* Whether the court failed to credit the full value of the contributions offered by Renco as the plan funder;

* Whether the court improperly used the standard for determining whether classification of unsecured claims under the plan was proper;

* Whether the court used improper standards to determine whether Renco's offer to buy claims in class 7 violates the bankruptcy code; and

* Whether the court improperly determined the value of the noteholders' collateral.

Renco filed its appeal on April 22.

The appeal also covers the court's decision to lift the moratorium intended to allow the opposing sides in the case to come up with a consensus plan.

On April 13, the bankruptcy court denied confirmation of both WCI's own plan of reorganization and the competing noteholders' plan.

The noteholders also filed an appeal of the denial April 28.

The court said the company's own plan cannot be confirmed because of "the overly conservative reckoning of enterprise value of the reorganized debtor and aggressive characterization of the new value being provided by existing equity; [and] the debtors' undervaluation of the secured noteholders' collateral, i.e., plan, property and equipment."

The court said the noteholders' plan is not feasible and therefore cannot be confirmed.

The court also said WCI's plan violates law because Renco is retaining 100% of the new equity while failing to contribute new value that is worth the reasonably equivalent value of the equity.

Also, the company's plan is not confirmable because its distribution of $94 million of new 9% 10-year notes does not comply with requirements.

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

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