Readers of recent letters will recall our efforts regarding Horsehead Holding Corp. Earlier this year, Horsehead was targeted by predatory lenders who are using a loanto-own strategy and, if successful, will succeed in acquiring the company at two times EBITDA.

On May 2, I flew to Delaware to join distinguished fund managers Guy Spier and Phil Town at a bankruptcy hearing on the unprecedented pro-se motion to appoint an equity committee. With a substantial audience and a large number of Kirkland and Ellis attorneys in opposition, Judge Sontchi indicated that, “something doesn’t smell right to the court.” In a groundbreaking ruling, the motion was granted and an equity committee approved.

Along with a remarkable nine-member team, I serve on the equity committee today and we represent the interests of 1,100 shareholders. We are operating in uncharted territory and are in the fight of our lives against the secured debtholders. Our team of attorneys and bankers are working at a grueling pace and we have launched an unofficial market test of the assets to restore and recover value.

Members of the secured debtholder group have caused great destruction that goes far beyond finance. In addition to bankrupting a solvent firm and destroying significant equity holder value, members of the ad-hoc group of secured lenders are responsible for idling recycling facilities and laying off hundreds of workers. The former employees and their families have since suffered immeasurably. Furthermore, the environmental harm caused by idling recycling facilities that treat hazardous waste is deplorable.

The equity committee is taking the high road while our opposition operates in the shadows. We are appreciative for the many journalists publicizing these actions and we welcome any further effort to expose this story through the media. Since our efforts began in May, the shares have appreciated nearly 500%. We are doing everything in our power to obtain a recovery.

[us_separator] The above post has been excerpted from a recent letter of Peterson Capital Management.

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