Oglebay shareholders' request for committee meets opposition

By Peter Heap

New York, April 6 - The request by shareholders of Oglebay Norton Co. for an official equity security holders committee to represent them in the bankruptcy proceedings received a wide range of opposition.

The company itself, the U.S. Trustee for the Chapter 11 case, the unsecured creditors and the bank lenders all opposed the move.

The bank lenders also opposed creation of a toxic personal injury claimants committee.

As far as appointing a committee of equity holders, the opponents said that no evidence has been put forward that they are not being adequately represented - and in any case the equity is likely to be worthless so the cost of a committee is not justified.

Appointing an equity committee is in any case at the U.S. Trustee's discretion, acting U.S. Trustee for Region 3 Roberta DeAngelis said in a court filing.

She added that she has already reviewed the equity security holders' request and decided not to appoint a committee.

"The equity holders simply have not demonstrated that their interests are inadequately represented absent the appointment of a separate committee of equity holders," DeAngelis wrote.

Despite requests, the equity holders have failed to identify witnesses who will testify in support of their motion or provide financial documentation to justify appointing a committee, she added.

"Based on the information currently presented to the court and the [U.S. Trustee], the debtors appear to be insolvent and the shareholders appear to have no real economic interest at stake," DeAngelis said.

She noted that the $89 million book value is misleading because it includes intangible assets that are non-liquid and have little to no true economic value including $74 million of goodwill and $35 million of prepaid pension costs. Thus the actual book value is negative $21.2 million.

In its filing, the company said that no objective analysis suggests it will be able to pay its creditors in full.

The official committee of unsecured creditors made a similar argument.

And the pre-petition secured lenders said in an argument taking just a single paragraph that "the economics of this case do not warrant the creation of an equity committee and the incurrence by the debtors and their estates of the additional fees and expenses such a committee would incur."

The lenders submitted a similar argument opposing creation of a toxic personal injury claimants committee.

A group of Oglebay Norton's shareholders requested that the judge direct the U.S. Trustee to appoint a committee on March 24.

As an unofficial group, the shareholders objected to the company's first motion for Chapter 11 debtor-in-possession financing because they believed the filing lacked important information they needed to evaluate whether the terms were necessary and appropriate. They also objected to what they said are "excessive fees."

They also objected to the company's second motion for financing because they were concerned about excessive fees, the company taking on more post-petition debt, giving the lender veto power over any reorganization plan, the timing and not having the explanations and information they needed.

The equity holders said they also have concerns about two Oglebay Norton directors who are or were directors of KeyBank NA, which is the agent for the company's pre-petition credit facility.

Meanwhile five law firms on March 29 requested formation of a toxic personal injury claimants committee.

The law firms represent 15,783 claimants with asbestos-related diseases and 483 claimants with silica-related diseases.

The attorneys said they were not notified about the decision to appoint an official committee of unsecured creditors so they were unable to ask to be on that committee.

They argue that the unsecured creditors' committee as it is composed does not represent the interests of their clients. Their clients are asserting claims alleging the company broke the law, whereas the creditors have contractual claims and the attorneys said the creditors have "no real interest or experience" in helping their clients.

Another reason for creating the committee, they argue, is that as far as they know Oglebay Norton has no insurance for toxic injury claims, which means their clients and the creditors will be battling over the same pot of money.

The motion on the equity committee was pushed back to April 28 from the original April 7. Meanwhile an April 14 hearing is scheduled on the torts committee.

Oglebay Norton filed for bankruptcy on Feb. 23. Its Chapter 11 case number is 04-10558.

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