Smurfit stock falls after stockholder committee denied

The value of reorganized Smurfit-Stone Container Corp. is "short of the point at which distributable value is likely to be available for shareholders," the bankruptcy judge said yesterday in a three-page opinion denying a motion for the appointment of an official committee to represent equity holders.

An equity committee should be appointed for the corrugated container and containerboard maker only when there is a "substantial likelihood" of a "meaningful distribution" to existing shareholders, U.S. Bankruptcy Judge Brendan Linehan Shannon said in his opinion. Shannon heard witnesses testify at a hearing on Dec. 4 in Wilmington, Delaware. He said at the time he would rule later.

The ruling caused Smurfit stock to lose 74 percent of its value yesterday. The shares closed at 8.7 cents, down almost 25 cents in over-the-counter trading.

From the evidence, Shannon concluded that secured and unsecured claims total $5.63 billion, not including interest on unsecured claims. The judge said in a footnote that interest presumably must be paid on unsecured claims before shareholders are entitled to retain stock in Chapter 11.

To read a summary of Smurfit's proposed reorganization plan, click here for the Dec. 1 Bloomberg bankruptcy report.

The Chapter 11 petition by the Chicago-based company listed assets of $7.45 billion against debt totaling $5.58 billion as of Sept. 30, 2008. Debt at the time included $1.2 billion under secured revolving-credit and term-loan agreements, five issues of unsecured notes totaling $2.28 billion, $388 million under an accounts receivable securitization facility, and $284 million owing on tax-exempt bonds.

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