WCI secured noteholders outline plan denial appeal issues

By Caroline Salls

Pittsburgh, May 9 - WCI Steel, Inc.'s secured noteholders outlined the issues of their appeal of the order denying confirmation of the noteholders' and the company's competing plans of reorganization, according to a Monday filing with the U.S. Bankruptcy Court for the Northern District of Ohio.

The noteholders' issues include:

*Whether the court was in error in denying the noteholders' plan because they did not have a fully executed collective bargaining agreement with the United Steelworkers of America;

*Whether the court was wrong in determining that the noteholders' plan "had no reasonable prospect of success" because of the lack of a collective bargaining agreement. Although the court said it was "only speculation" as to whether the noteholders would be able to negotiate an agreement, the noteholders said an agreement in principle had been negotiated;

*Whether the court was wrong in excluding the expert testimony of the noteholders' labor counsel, which said the noteholders would be able to negotiate an agreement with the steelworkers;

*Whether the court was wrong in relying on the testimony of the steelworkers' counsel when it determined the noteholders did not have a reasonable chance of negotiating an agreement;

*Whether the court was wrong in saying the noteholders' plan was not feasible because of its treatment of WCI's current pension plan;

*Whether the court's opinion on the pension plan was based on the noteholders' plan's reliance on future conduct by WCI's parent, Renco Group Inc., and the Pension Benefit Guaranty Corp. "over which the secured noteholders have no control." The noteholders said the plan relies only on Renco acting in its financial self interest and the Pension Benefit Guaranty Corp. by its statutory obligations.

*Whether the bankruptcy court was wrong in ruling that it was only "speculation" whether Renco would take over the current pension plan, even though it would be in Renco's financial best interest to do so; and,

*Whether the court was wrong in believing that the $100 million in new notes to be issued to the secured noteholders under the plan is evidence of the value of their collateral. The noteholders said in the filing that, under their plan, they would also receive 40% of the equity of the new company that purchased WCI's assets and the right to buy 60% of the equity of the new company for $50 million.

The noteholders are also appealing the court's decision to lift the moratorium to allow the company and the noteholders to come up with a consensual plan.

Renco has also appealed the denial of WCI's plan.

The court denied the competing plans on April 13, saying that the noteholders' plan was not feasible.

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 court said 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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