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WCI Stakeholders Reach Agreement in Principle on Bankruptcy Plan

03/16/2006 -  

March 16, 2006 — The parties involved in WCI Steel's Chapter 11 case have reached an agreement in principle to settle outstanding issues involved in the confirmation of the amended noteholders' plan of reorganization.

Under the agreement, Renco will assume WCI's existing pension plan, resulting in preservation of retiree pension benefits.

In return, the Reorganized WCI will contribute to the existing pension plan between approximately $15 million and $25 million, depending on the tax consequences of the reorganization. The agreement eliminates all claims filed by the Pension Benefit Guaranty Corporation against WCI.

The plan will result in the issuance of $100 million 8% secured notes and 9 million shares of preferred and common stock. Noteholders will receive all of the new notes and virtually all of the equity of the reorganized company on account of their claims and their agreements to invest $50,000,000 in the reorganized company. The Noteholders have asserted that the reorganized company will have a total enterprise value of between $275 million and $325 million.

Unsecured trade creditors will receive between 20% and 22% of their claims in cash.

The agreement involves WCI's ultimate parent, The Renco Group, Inc. assuming responsibility for the existing WCI pension plan, with certain support payments to be made to Renco by the reorganized WCI. The USW and the Pension Benefit Guaranty Corp. have endorsed the agreement.

Confirmation of the plan — and ratification of the collective bargaining agreement by the United Steelworkers union — would permit WCI to conclude its Chapter 11 case and return to the market in a much improved competitive position.

"We are obviously pleased that our exit from bankruptcy is in sight," said Patrick G. Tatom, WCI's President and CEO. "Emergence from Chapter 11 will allow everyone at WCI to focus our full energy on building our future as a strong and independent custom flat-rolled steel producer."

"We also are deeply gratified by the support of our customers as well as our suppliers, creditors and employees throughout this process," Tatom said.

A hearing on the reorganization plan is scheduled for March 28 in U.S. Bankruptcy Court in Akron.

WCI Steel, Inc. is an integrated steelmaker producing more than 185 grades of custom and commodity flat-rolled steel at its Warren, Ohio, facility. WCI products are used by steel service centers, convertors and the automotive and construction markets. The company has approximately 1,600 employees. WCI filed a voluntary petition for protection under Chapter 11 of the U.S. Bankruptcy Code on Sept. 16, 2003.