UPDATE 1-Smurfit says creditors back plan, but battle looms

* Company touts votes in favor of reorganization plan

* Equity holders begin fight against plan next week

* Shares plummet more than 20 percent
(Update with byline, dateline, bullet points and new first six
paragraphs)

By Tom Hals

WILMINGTON, Del., April 15 (BestGrowthStock) – Bankrupt packaging
maker Smurfit Stone Container Corp (SSCCQ.PK: ) touted
“overwhelming” support for its reorganization on Thursday, but
initial hearings to approve the plan indicated a battle looms
with shareholders.

The announcement that the company’s creditors backed the
plan of reorganization glosses over the fact that shareholders
were not permitted to vote on the plan, which proposes to wipe
them out. The company’s pink sheet shares were down 24 percent
to 16 cents on Thursday afternoon.

The confirmation hearings are scheduled to run 10 days. The
most contentious objections will come from shareholders, who
beginning on Tuesday will present evidence that they say will
show that management is undervaluing Smurfit, and therefore
denying them a recovery.

The company sparred on Thursday with an attorney for a
group of shareholders which wants the release of an updated
value range for the company.

Rachel Strickland, of Willkie Farr & Gallagher, suggested
the company feared giving investors any reason to push up the
value of its bonds, which were trading nearer to par. Higher
bond prices would indicate that equity holders, the next in
line for payout, might be closer to a recovery.

“There is no reason to keep it under lock and key,” she
said of the company’s updated report on the valuation range.

Smurfit Stone unveiled its reorganization plan in December.
It proposes paying secured lenders in cash and giving unsecured
claim holders equity in the company.

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

Smurfit Stone had the biggest numbers of U.S bankruptcy
claims transferred, with some 395 claims worth about $30.7
million changing hands in March, according to trading platform
operator SecondMarket.

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

Stock Market Analysis

(Additional reporting by Santosh Nadgir in Bangalore, editing
by Gerald E. McCormick)

UPDATE 1-Smurfit says creditors back plan, but battle looms