Weirton Steel objects to motion to use DIP funds to pay for financial advisor

By Carlise Newman

Chicago, Nov. 10 - Weirton Steel Inc. filed an objection to a motion from J.P. Morgan Trust Co. as indenture trustee and the ad hoc committee of senior secured noteholders to increase their carve-out under the company's debtor-in-possession financing to cover costs for a financial advisor. Weirton said it is inappropriate as a matter of law to pay costs of a financial advisor in these circumstances.

Weirton did approve of J.P. Morgan's motion seeking to hire a financial advisor.

Weirton said there is little room in its restructuring expense covenants for payments to another professional, as it pays the fees of, among others, its bankruptcy counsel, its corporate counsel, its financial advisor, its investment banker, counsel to Fleet Capital Corp., Fleet's financial advisor and counsel to its creditors committee.

J.P. Morgan suggested that Weirton's emergence plan premised on government-guaranteed debt is inappropriate. The bank said obtaining high-yield secured term debt financing of $70 million would be more appropriate, and with 62% of the financing to be used to pay in full the subordinated secured claims of noteholders, whose claims total $148 million.

Weirton said it is not logical that it would pay for a financial advisor under circumstances where the advisors have created unrealistic expectations and have recommended that Weirton substantially leverage the reorganized company to pay in full the under-secured claims of the bank.

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