Smurfit, shareholders start bankruptcy plan fight

* Packaging company seeks to confirm reorganization plan

* Shareholders say company is undervalued and solvent

By Tom Hals

WILMINGTON, Del., April 20 (BestGrowthStock) – Bankrupt packaging
company Smurfit Stone Container Corp (SSCCQ.PK: ) began a legal
battle with shareholders on Tuesday that will hinge on whether
it undervalued its business, unfairly wiping out its stock.

Smurfit, the second-largest containerboard producer in
North America, has gotten creditor approval for its plan to
reorganize the company by paying secured lenders in cash and
giving unsecured claim holders equity in the company.

The plan, which Smurfit presented in court on Tuesday,
proposes to wipe out shareholders’ stakes.

The company’s analysis values the business at as little as
$3.4 billion, below $4.4 billion in claims that Smurfit said
take priority over shareholders.

Shareholders hired experts who established a value at as
much as $5.8 billion, according to court documents.

Smurfit’s assets exceed its debt, said David Rosner of
Kasowitz, Benson, Torres & Friedman, who represents a group of
shareholders.

“The bottom line is, in a solvent company, the equity owns
the company.”

Shareholders have focused on Smurfit’s use of 2009 for
their base year in their projections, “the year the company
spent 11 months in bankruptcy amid a deep global recession,”
said Rachel Strickland, of Willkie Farr & Gallagher, which is
representing another group of shareholders.

“This management is frankly not experienced with multiyear
projections,” she said. “The company had never had a well
established process to forecast cash.”

The company filed for bankruptcy in January 2009 after a
rise in raw materials costs coincided with a drop in demand and
tight credit markets.

The Chicago-based company plans to issue new common shares
that would be traded on the New York Stock Exchange or Nasdaq
market. The company has set aside stock for management
incentives.

Rosner asked U.S. Bankruptcy Court Judge Brendan Shannon to
be aware of what he called “extraordinarily generous”
management incentives.

“Giving $200 million to management under the plan and the
rest of the equity to creditors, it implies there could have
been an exchange. Your honor has to be vigilant in keeping that
in mind.”

Shannon is not expected to rule until sometime after the
courtroom hearings have ended.

The case is In re: Smurfit Stone Container Corp, U.S.
Bankruptcy Court, District of Delaware, No. 09-10235.

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(Reporting by Tom Hals. Editing by Robert MacMillan)

Smurfit, shareholders start bankruptcy plan fight