NEW YORK (Reuters) – Equity holders for bankrupt Smurfit Stone Container Corp (SSCCQ.PK) object to the packaging maker’s plan of reorganization, saying it could rob shareholders of proceeds they might otherwise share with creditors, according to court documents.
Bankruptcy Judge Brendan Shannon approved the company’s disclosure statement in January, allowing Smurfit Stone to solicit votes in favor of its plan.
But the approval also set up a showdown with shareholders, who will be wiped out in the restructuring.
In court documents dated Tuesday, attorneys for Mariner Investment Group LLC and Senator Investment Group LP said the equity value of Smurfit Stone subsidiaries will flow up to the parent company and accrue to the benefit of the company’s creditors.
“… interest holders of Smurfit Stone are robbed of potential value to which they may be entitled,” lawyers for the equity holders said in court documents.
In addition, there was a lack of information about how Smurfit valued the company and the timeliness of the information that was used, the equity holders said.
Equity holders have proposed to backstop a rights offering for the holders of preferred interests in the company, but the company has not responded to the offer, according to documents.
In separate documents, Mariner and Senator objected to the company’s request to hire former chief financial officer John Murphy as a consultant, saying his compensation package, worth about $750,000, is too high for about 10 hours of work per week for up to six months.
“We are aware of the objections, they are not unexpected,” said Smurfit Stone spokeswoman Sue Neumann, in an email. “The company intends to respond to these and all objections in the ordinary course and we look forward to settling the case.”
Smurfit Stone, which also recycles paper, filed for bankruptcy in January 2009 after a sharp rise in raw material costs coincided with a drop in demand and tight credit markets.
The company’s stock rose 1 cent to 25 cents in pink sheet trading on Wednesday.
(Reporting by Chelsea Emery; Editing by Steve Orlofsky)