Chesterton Tribune

Bethlehem Steel Corporation dissolves at one minute to midnight New Years Eve

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By KEVIN NEVERS

Its I-beams poke the eye of the sky in New York City and its girders span the cold waters of San Francisco Bay. Its plate sheathed the hulls of 1,121 ships during World War II and its rails crisscrossed the continent. But the company whose steel was at the American backbone is now only a bittersweet memory.

At 11:59 p.m. Dec. 31 Bethlehem Steel gave up its corporate ghost and was officially dissolved, in accordance with a plan of dissolution filed by the company on Sept. 10 and approved by the U.S. Bankruptcy Court for the Southern District of New York on Oct. 22.

Since April 30, when International Steel Group acquired substantially all of Bethlehem’s assets, the company has been making good on its secured debts, settling tax claims, and paying administrative expenses, and in its monthly operating statement for November Bethlehem said that it expected that process to be completed by the end of the year and the company—along with 21 of its subsidiaries, including Chicago Cold Rolling, Bethlehem Rail, and Greenwood Mining—dissolved. But the effective date of that dissolution remained unclear until New Year’s Eve afternoon, when Bethlehem released a two-sentence death-bed statement announcing the demise of the company within hours.

As of Nov. 13, 135,486,463 shares of Bethlehem common stock were outstanding, and though they had continued to trade over-the-counter at prices below a penny per share—after the New York Stock Exchange de-listed the stock in 2002—the dissolution of the company rendered those shares worthless and removed them from trading Friday morning.

One last task remains: the creation of a “liquidating trust” for the disbursement of remaining assets to “allowed unsecured creditors,” whose short end of the claim stick Bethlehem estimated in its plan of dissolution at between $4 billion and $6 billion. Unsecured creditors can expect a recovery of less than 1 percent, the bulk of it from shares of Class B ISG stock issued to Bethlehem as part of the deal, valued at the time at $15 million, and set aside specifically for unsecured creditors. Bethlehem has around $600,000 as well in proceeds from two benefit trusts originally held by Lukens Inc., and it may be able to recover an “uncertain” amount of cash, according to the plan of dissolution, from lawsuits which it filed to collect pre-bankruptcy payments.

As the Committee of Unsecured Creditors noted in the plan of dissolution, “Even though the recovery to general unsecured creditors is very small, the committee believes the recovery is the best that could be achieved given the difficult circumstances of the case.”

Secured creditors did much better, of course, chief among them GE Capital, whose $450 million in debtor-in-possession financing, extended to Bethlehem when the company filed for Chapter 11 bankruptcy protection in 2001, allowed the company to stay in operation as it endeavored to reorganize. Other secured creditors: a number of “inventory lenders,” which held liens on Bethlehem’s inventory, owed $290 million; and RZB Finance, which held a lien on equipment in the new cold sheet mill at the company’s Sparrows Point, Md., Division, owed $45 million.

Bethlehem provided full recovery to all of the major secured creditors on or soon after the day of the asset sale, when ISG transferred to the company approximately $752 million in cash and a $120 million receivable since collected. As of Sept. 30 Bethlehem listed total receipts of $898.9 million, total disbursements—in debt repayments, accrued payroll and employee benefits, reorganization costs, and other items—of $804.8 million, and cash in hand of $94.1 million.

That cash was earmarked, however, and not for the unsecured creditors. Among other liabilities projected by Bethlehem in its plan of dissolution: $25.8 million in administrative expense claims, $2.6 million in priority tax claims, and $2 million in other secured claims. In October Bethlehem also paid $7 million to settle a lawsuit filed May 22 by 108 former salaried employees who challenged the company’s decision, when it terminated retiree health-care benefits, not to offset payouts under its severance plan—as it typically had done—with health-care benefits and enhanced pension benefits for employees actively at work on or after Feb. 1. In addition, the U.S. Bankruptcy Court ordered the company to reimburse up to two weeks of COBRA premiums paid by retirees who had enrolled in that program under the Consolidated Omnibus Budget Reconciliation Act of 1986, a liability which Bethlehem pegged at $4.2 million in its monthly operating statement for November.

Bethlehem was established in 1904 when industrialist Charles Schwab acquired the facilities of the Saucona Iron Company in Bethlehem, Pa.—formed in 1857—and during World War I the company became a leading armorer, a role it famously continued in WWII when it employed 300,000 people, operated two shipyards, one on the East Coast and one on the West Coast, and built Liberty ships enough to prevent Hitler’s U-boats from blockading Great Britain into starvation. In 1964 Bethlehem opened its Burns Harbor Division, the last integrated mill ever built in the country, but with the rise of minimills and the increasing marketshare in the U.S. of imported steel, the company saw its fortunes decline and in 1995 its blast furnaces in Bethlehem went cold forever, followed in 1998 by the darkening of its last coke oven there. After hemorrhaging cash for three years—as a financial crisis abroad prompted foreign steelmakers, subsidized by their governments, to flood the U.S. with cheap product, forcing steel prices into the bargain basement—Bethlehem filed for bankruptcy on Oct. 15, 2001, when it finally collapsed under the staggering weight of its legacy costs, the $4 billion to $6 billion in health-care, pension, and life-insurance benefits owed to its retirees.

 

Posted 1/5/2004