Kaiser Steel’s Comeback Bid : Manufacturing: The once-ailing company, now concentrating on environmental operations, re-enters the public stock market. The move renews hope for thousands of the firm’s Southern California retirees.

The old Kaiser Steel Co. could be called a classic victim of the business excesses of the 1980s. Savvy investors walked into a vulnerable company and waltzed away with more money than they had brought; the company’s assets were leveraged, exchanged and liquidated, and a debt-crippled company limped into bankruptcy court, its pockets bulging with lawyers’ bills.

Now, nearly two years after emerging from bankruptcy protection, a reorganized Kaiser Steel Resources is trying to build a future from the underpinnings of the old company--its land, mines and water rights. Meanwhile, its KSC Recovery subsidiary pursues the old battles in a series of lawsuits against former officers, directors and shareholders whom it accuses of looting Kaiser Steel.

Caught up in this turmoil have been thousands of former Kaiser employees throughout Southern California, who watched first their steel-making jobs, then their pensions and guaranteed lifetime medical insurance disappear. What they got in exchange was a half interest in a bankrupt company already torn by a protracted shareholder battle for control.

Finally, last week, that half interest seemed to have some palpable worth when Kaiser Steel Resources, now concentrating on environmental businesses, re-entered the public stock market. Even in its very modest trading, the retirees saw prospects for funding their restored, but sharply reduced, medical benefits plan for as long as there still are Kaiser Steel retirees who need it.

Until now, the retirees have been depending on the lawsuits to keep the benefit plan going, but it has been “operating hand to mouth,” said Nicholas Rickard, who retired from Kaiser Steel in 1983 and now serves on the board of the Voluntary Employees Beneficiary Assn., which administers the benefits.

The lawsuits have netted about $28 million in settlements--a mere lick of water in a desert of debt. Less than one-third of the settlement proceeds so far have gone to the employee association, which got an initial $7 million in funding when the bankruptcy court ordered yet more Kaiser assets to be sold off. An even smaller amount has gone to repay the federal government, which took over the Kaiser Steel pension fund. Attorney and administrative fees ate up most of the rest.

“It’s a sad, sad tale,” said Daniel M. Larson, president of KSC Recovery.

Still pending are suits that will lead the recovery unit through a thicket of curious business decisions to the doorsteps of a curiouser group of players, including investors Irwin Jacobs and Joseph A. Frates, Drexel Burnham Lambert, First Boston Corp.--and even the Resolution Trust Corp., as inheritors of a failed Oklahoma savings and loan.

Some former directors and officers feel stung by accusations that they abetted what current management calls the looting of Kaiser Steel.

Among them is Stephen A. Girard, who as chairman of Kaiser Steel began the shutdown of its mill operations in 1981, oversaw its transfer to new owners in 1984 and remained on the board until early 1987. His attorney, Daniel Schwab, said the oil price collapse in the mid-1980s--not looting--caused troubles for Kaiser, which had refocused itself on energy-related business. Schwab said Girard and other directors of that period did not enrich themselves at Kaiser’s expense.

Yet some people clearly did profit. They include Jacobs’ investment group, which earned $14 million in “greenmail” in 1983 when it bought Kaiser Steel stock, made a bid for the company, then agreed to back out--for a premium--when other suitors bid higher. Jacobs is among hundreds of individuals, brokerages and professional advisers being sued--and suing--in a round of charges and countercharges that Jacobs’ attorney, Joseph Meyer, calls “dizzying and bizarre.”

KSC Recovery also sued the group that won the bidding war for Kaiser Steel--the partnership of Denver coal man Monty Rial and Frates.

Rial’s Perma Resources and Frates’ Tulsa, Okla., investment group went 50-50 in their 1984 leveraged buyout of Kaiser. A year later, Rial used the company’s assets to buy out Frates. Rial was ousted in 1986, when he lost a battle for control of Kaiser to dissident shareholder Bruce Hendry.

Hendry took the company into bankruptcy in 1987 and oversaw the transition to new management, including current Chairman Richard E. Stoddard, in 1988.

Girard’s attorney Schwab said it was the Hendry team and not the former directors and executives who abrogated Kaiser’s responsibilities to its retirees. He suggested that the bankruptcy filing was motivated not by the company’s condition but by a desire to eliminate those responsibilities.

Many of the retirees strongly disagree. “If it wasn’t for Hendry, we wouldn’t have had anything,” said Ronald Bitonti of Fontana, who represents fellow Kaiser Steel retirees on the benefits association board and is an international representative for the United Steelworkers of America. “The people who caused the company to go bankrupt were Monty Rial and Frates and that gang. They raped the company.”

Though the company has settled with Rial, it is still suing Frates, contending that he fraudulently made $40 million on his original $1-million investment. Part of Frates’ take was a valuable piece of Fontana real estate which he later used as collateral to buy failing State Federal Savings & Loan and its development subsidiary in Tulsa. KSC Recovery hopes to at least get back $11 million from the sale of that property being held in escrow by the Resolution Trust Corp., which now controls the savings and loan.

Also pending are actions against a number of shareholders, their brokers, investment bankers and other professional advisers, including Drexel Burnham and First Boston. KSC Recovery wants to recoup some of the gains investors realized during the rapid succession of takeovers, as well as fees Kaiser Steel paid to consultants for what KSC Recovery now believes was bad advice.

Despite the number of lawsuits, few expect the settlements or proceeds to return Kaiser to the days when it was cash-healthy and asset-wealthy.

But nearly everyone involved in the drama believes that there’s a gold mine in the assets of Kaiser Steel Resources.

The “gold mine” is actually Eagle Mountain, the iron ore mine about 60 miles due east of Palm Springs that, in 40 years of operation, yielded millions of tons of ore for use in Kaiser’s steel-making operations.

Kaiser, now based in Rancho Cucamonga, plans to turn the Eagle Mountain site into a landfill. “We made some extremely large holes in the ground there. It could take care of Los Angeles County and surrounding areas’ landfill problems for the next 100 years,” said retiree Rickard.

Kaiser’s own Eagle Mountain train, which used to ship the ore to the Fontana plant, would be used to transport the refuse over Southern Pacific railroad lines to the site.

The plan for Eagle Mountain, which still has some regulatory hurdles to overcome, is one of four primary focus areas for Kaiser Steel Resources, all of which rely on assets that once were devoted to steel-making operations.

The others:

* An industrial park at the former steel plant in Fontana. The company owns nearly 1,000 acres of land there, in prime Inland Empire industrial country. That figure includes a 288-acre parcel reclaimed by KSC Recovery as part of the settlement of its suit against Rial, but not the nearby parcel that Frates got.

* Fontana Union Water Co., which provides water to the Fontana area.

* A waste treatment plant in Fontana.

Where the old Kaiser Steel was a struggling company in a declining industry, the reorganized firm views itself as being in growth businesses. And most observers agree.

“Kaiser is a gold mine for its present owners (because of) assets it had all along,” said attorney Schwab.

The problem for many retirees is waiting for those assets to start producing a flow of cash. The benefits group estimates it will cost $4 million to $5 million annually to provide what amounts to half the former health benefits, with insurance costs still taking double-digit leaps each year.

Some retirees who were young enough at the time of the bankruptcy found jobs and benefits elsewhere. Some have died. And others suffered through many months without benefits.

“We had some older people on small pensions who were ill when we lost hospitalization (benefits), and their doctors were giving them prescriptions they couldn’t afford to have filled,” said Thomas Rabone, who after 33 years at Kaiser retired when the mill was shut down 1983.

Right now, the retirees’ portfolio is all Kaiser stock. “They need cash to fund their liabilities,” said Scott L. Beiser, managing director of Houlihan, Lokey, Howard & Zukin, a Los Angeles-based banking firm that is advising the employee benefits association about managing its assets. Beiser said the company’s return to the public stock market will give retirees the option of liquidating some of their assets and diversifying into a more traditional portfolio.

For the roughly 6,000 retirees still being served by the medical and pension plans, that option is a welcome relief.

“A little bit of the bitterness has worn off,” said Rabone. “All we have left now is the company and the success of the company to subsidize retirees with health and medical needs. We’ve promised to get as much as we can and as soon as we can, but it’s unrealistic to think we’ll recover a major portion of what (we) lost.”