WCI Bondholders Cleared to File Suit

January 2, 2004 (PLANSPONSOR.com) - Bondholders of the bankrupt WCI Steel have been given the green light to file a lawsuit to stop the beleaguered company from funneling millions of dollars into its underfunded pension plan.

>Federal bankruptcy judge William Bodoh said Wilmington Trust Co. and 12 other secured lenders can pursue a legal remedy to retrieve the $5 million payment the steel company made into its pension plan in November. Another similar payment is due in February for the plan, which is underfunded by more than $100 million, according to a Youngstown (Ohio) Vindicator report.

>Bodoh’s decision is an about face from his November ruling in which he Bodoh refused to grant the request, saying the bondholders had other remedies under the law.   The lenders, which collectively hold more than $300 million of WCI’s long-term bonds, argue that WCI cannot afford to pay its pension costs and that its parent company, Renco Group, is ultimately responsible for the payments by law.   Further, the banks say further payments into the pension fund will hamper the company’s ability to emerge from Chapter 11 bankruptcy, which WCI has tentatively scheduled for June.

Ultimately, Bodoh found that since Renco owns more than 80% of WCI’s equity it is liable for any underfunding of the pension plan. His ruling did not address the merits of the bondholders’ arguments, however.