Smurfit-Stone shareholders want more say in reorganization

SSmurfit-Stone Container Corp. shareholders renewed their fight for a court-approved role in reorganizing the bankrupt packaging maker, arguing that an improving economy may salvage their investments.

Senator Investment Group LP and Mariner Investment Group LLC said that Smurfit is financially stronger than when it entered bankruptcy in January. The company generated enough cash in September to voluntarily repay $290 million of a $400 million loan it took out to help it survive bankruptcy.

In July, investors in the company's Class A preferred shares began betting that the Smurfit will have enough value left over after it reorganizes to return something to equity owners. The shares began rising on July 22 from 55 cents each and today stand at $6.25. Bonds due to be repaid in July 2012 have climbed from less than 6 cents on the dollar in March to almost 76 cents on the dollar today.

"The market is recognizing the inherent value of this company more and more every week," Mariner attorney Rachel Strickland said in an interview.

Shareholders today asked U.S. Bankruptcy Judge Brendan Linehan Shannon to schedule a hearing next month on whether they can form a formal committee whose legal fees and other expenses would be paid by Smurfit-Stone. A court-approved committee would give shareholders more say in how the company is reorganized, Strickland said

Such committees are rare because shareholders normally get nothing back when a company in Chapter 11 reorganizes. Under bankruptcy laws, creditors normally must be repaid in full before shareholders are allowed to collect anything.

Smurfit-Stone filed for bankruptcy Jan. 26, saying it had $7.5 billion in assets and $5.6 billion in debt as of Sept. 30, 2008. The company blamed the economic slowdown and the credit crisis.

The case is Smurfit-Stone Container Corp., 09-10235, U.S. Bankruptcy Court, District of Delaware (Wilmington).