Smurfit-Stone's shareholders may have role in Chapter 11 reorganization

Smurfit-Stone Container Corp. shareholders will know within a week whether they'll get a wider role in reorganizing the bankrupt packaging maker, a judge said.

U.S. Bankruptcy Judge Brendan Linehan Shannon in Wilmington, Delaware, said today he will rule within seven days on a shareholders' request for a court-approved committee to represent their interests in the Chicago-based company's case.

Shareholders and company managers disagreed today on whether Smurfit-Stone may be worth enough when it exits Chapter 11 bankruptcy to repay its debts and leave something for its owners.

A ruling in favor of forming a shareholders' committee would give them more access to company financial data and ensure that Smurfit-Stone will pay their legal and financial advisers.

In bankruptcy cases like this one, creditors oppose an equity committee because it would make it easier for them to wipe out stockholders and "laugh themselves silly on the way to the bank," shareholder lawyer Rachel Strickland said.

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

A company financial adviser, Joe Miller of Lazard Freres & Co. LLC, said an analysis by shareholders inflated Smurfit- Stone's potential value.

He said under questioning by shareholder attorney Brian O'Connor that Smurfit-Stone managers didn't ask him to determine how much the company may be worth.

Miller said he has never been involved in a bankruptcy case in which the company put together a reorganization plan without first doing a so-called valuation analysis.

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