Geneva pay plan approved

A federal judge on Tuesday approved a bankruptcy confirmation plan for Geneva Steel that allows the company's unsecured creditors to be paid, bringing an end to a case that has lasted for almost five years.

The plan, approved by Judge Glen E. Clark, will pay Geneva's unsecured creditors somewhere in excess of 25 cents for every dollar owed them, according to James T. Markus, Geneva Steel's Chapter 11 trustee. The exact amount is unknown.

Markus said $3 million owed to more than 300 Geneva employees with priority claims — namely, wages and benefits — will largely be paid in full by the end of this year.

"I think it's a good day for all the creditors," Markus said. "It allows us now to start making payments that we couldn't make without the court order."

While hundreds of Geneva employees will share $3 million, Ken Johnsen, the former president and chief executive of the Vineyard-based steel company, is still seeking roughly $3.5 million for himself in incentive compensation under an employment agreement that was approved by the court in 2003.

Markus has disputed Johnsen's incentive package, alleging that the former CEO participated in real estate transactions that were detrimental to Geneva's estate.

The confirmation plan was initially opposed by Johnsen, but those objections were withdrawn after language was inserted to guarantee a $7 million reserve fund would be established until Johnsen's dispute was resolved.

According to James Swindler, Johnsen's attorney, Johnsen is close to reaching a settlement agreement with the trustee in an amount lower than $3.5 million.

The total unsecured claim pool amounts to $169 million. But after a settlement by Geneva with the federal Pension Benefit Guaranty Corp., unsecured claims will be reduced to roughly $145 million.

J. Thomas Beckett, an attorney for the unsecured creditors committee, said unsecured creditors overwhelmingly supported the trustee's plan, with 97 percent of their votes in favor.

"It's the closing of another significant chapter in the history of Geneva," Beckett said. "It means that what remains of the process is simplified. Now there are only a handful of issues to sort out before the case is finally closed."

Those issues include a dispute over $2.7 million in legal fees paid to Kaye Scholer, a Chicago law firm that represented Geneva. The trustee and committee oppose the payment of those fees.