Horsehead Holdings: Guy Spier Submission to Judge Sontchi

Guy Spier
1345 Sixth Avenue, 2n d
Floor, New York, NY 10105
gspier@aquamarinefund.com
In the U.S. Court of Bankrupctcy of Delaware
Horsehead Holdings
Hearing for an Equity Committee.
In front of Judge Sontchi
May 2nd, 2016
Thank you for holding this hearing.
Judge Sontchi, thank you for agreeing to see us. All of us deeply value the American system of
justice and the opportunity that you have given us to make our voice heard. That is not the case
in many countries around the world, where property rights and the right to due process are
regularly ignored and summarily dismissed.
I am grateful to be able to participate in the world’s leading economy. Where property rights are
respected, and where the extinguishment of property rights is something taken very seriously –
not something to be done light-heartedly, and without careful consideration.
God Bless the United States of America.
By way of introduction.
I am professional investor. and I run a fund of approximately $160 million investing in equities. I
have been doing this for almost 20 years. In comparison to funds like Greywolf and Hotchkis
and Wiley who run of the order of $3-4 billion each, I am miniscule. My annual operating budget
is of the order of $1.5 million a year.

Guy Spier
In 2014, I published a book titled “The Education of a Value Investor”.
As you know, I appear here on account of my personal ownership of Horsehead shares, not the
shares purchased by the fund that I manage. I am here in a pro-se capacity and can only represent
myself.
Also, by way of background, you should know that although I have an MBA and an
Undergraduate degree from Oxford in economics, I did study law for two years and I am familiar
with system of common law. Since the Horsehead bankruptcy filing, I have been racing to learn
as much as time allows about US bankruptcy law. Moreover, I have had some opportunity to
educate myself on the chapter 11 process that we find ourselves in through conversations with
friends and with bankruptcy experts.
Of course, I do not have the enormous legal talent, knowledge and ability that is arrayed against
us. The lawyers representing the objecting parties are being paid, by Horsehead, our corporation,
many hundreds, if not thousands of dollars per hour to oppose us. By contrast, I and my fellow
shareholders appear on account of our own investment in Horsehead, and we appear on our own
dime. We don’t cost the company, this court, or the taxpayer a penny.
Apologies for lack of legal training. I will do the best I can. Even though I am pro-se, I
have a huge responsibility to all the shareholders and I don’t want to mess this up for them.
Please bear with me.
Your Honor, you have to act through law and in accordance with the law. And I am here to
convince you that the just and correct course of action for your court is to appoint an equity
committee. I hope that although I am relatively ignorant of the law, you will listen carefully to
understand my arguments, and that if there is an appropriate legal basis to my submission, that
you will help me, or provide me with the resources to get there.

Guy Spier
We are not a group of embittered shareholders
I want to say up front and emphatically: We are not a group who refuse to acknowledge the harsh
facts of bankruptcy. We understand that some investments, and some companies fail.
I have now read about plenty of bankruptcies: In almost all cases, there was plenty of
forewarning by the company that they were entering the zone of insolvency. Most importantly, in
all of those cases, the company communicated through its filings and news releases explicitly
warning investors that they might have to file.
By contrast, Horsehead’s bankruptcy filing came as a complete surprise to all of Horsehead’s
shareholders.
In a certain way, it is the system that is on trial here.
I and the shareholders, as well as other observers of this process are asking: can investors trust
the markets? Can they invest and trust that the system will protect them? Do the SEC rules of
fair disclosure mean anything? Do the New York Stock Exchange rules mean anything. Do the
Delaware rules of chancery on the means by which someone, or a group of people can take
control of a corporation mean anything?
In short, can the well-heeled, the aggressive, the powerful and the rich take advantage of their
superior knowledge and resources and use the American bankruptcy system to take control of
assets that were in the hands of the less well off, the less powerful, and the less well connected?
And, we ask: Where is the financial system moving? Are we moving towards more democracy -
where more and more people participate in enterprise capitalism? And where the courts and
regulatory bodies protect their right to fairness and full disclosure? Or the opposite.
Your decision in this case will affect our and many observers’ opinion of what the bankruptcy
system is really about.

Guy Spier
Another apology.
As you know, I disagreed with the US Trustee’s response to my petition for an equity committee.
Having spent $100,000 of my own money for the submission to the US Trustee, I was informed
by my attorney at the time – Ancela Nastasi that the cost of filing this motion would be
$250,000. Simply money that I did not have to spend. But when I decided to do it Pro-Se, I knew
it had to be genuine, so I made sure that I owned shares of the company personally and set about
writing the motion on my own. In that submission, I did not realize that you should be addressed
as Judge, not Justice. I hope that you will accept my apology for that. I now know to address you
as Judge Sontchi.
I also need to apologize to you for another reason. Because I know that our presence here makes
your life far more difficult. I understand which way the wind is blowing. I and all the other
equity holders understand the rules of priority, and that in order to receive a meaningful
distribution all the other claimants against the company need to be made whole.
Even though I am simply requesting an equity committee I can understand that the most straight-
forward thing for this court to do would be to approve a course of action that leaves the
shareholders with nothing.
My intent is not to make your life difficult for the sake of it and is not my intent to waste your
court’s time. I understand that this is one of many cases on your docket, and that you have
enormous amounts of work to get through. And it is certainly not my intent to seek to gain a
distribution where we do not deserve any.
But I want to remember here that while there is much in our liberal democracies that is highly
efficient, justice, by its nature is not efficient and not meant to be efficient. If we were willing, as
a society to endure a lot more injustice, we could model ourselves on a country like Russia where

Guy Spier
courts often approve asset grabs. Here we don’t do that. That takes time, and causes headaches.
But for a very good cause. For fairness and for justice. And that is why we are here.
Let me start with the objections to our motion to form an equity committee.
Let me first dismiss a couple of objections with are so risible that I thought twice about
addressing them in this statement.
The first is that we can represent ourselves. Your Honor, not one of us is a significant owner. We
are geographically dispersed. Very few of us manage money professionally and none of us can
afford the sort of high powered attorneys, like those from Kirkland and Ellis or Akin Gump that
our very well-funded opponents have.
The second is the idea that the KPMG report is hearsay – which is also risible. It was prepared
for Aquamarine Capital management through its then lawyers, Nastasi partners and sits on the
docket as part of this case.
Let us go to the substantive objections as I understand them.
I can summarize them as follows.
1. The KPMG Report is based on old data
2. The KPMG report is flawed.
3. Book value is not a guide to valuation.
4. That the market valuation of the securities proves their point.
Let me deal with these.
1. The KPMG report based on old data
The reason why the KPMG report is based on old data is that they are the only reliable data we
have. At the time of our motion, the company had filed its third quarter 10q with the SEC. Over

Guy Spier
and above that, they made some declarations in their first day filings that showed enormous book
value as well as more than $80 million or more of ebitda two years out.
But your Honor, the debtor, through its control of the corporation and the secured creditors,
through their extraordinary influence over this process are seeking to squash down the value of
the corporation.
They can control the flow of information. For example, it was only a few days ago that they filed
the exhibits to their proposed plan of reorganization – in which they have a liquidation analysis
and a valuation analysis.
We have not had time to examine these, or to be able to properly challenge their assumptions.
Indeed, the debtors themselves don’t want to hold themselves to their assumptions or to their
conclusions – because these filings with the court are riddled with hedging statements that say
that they are making estimates that they cannot be held to, and where they say that they reserve
the right to change their estimates and their assumptions, and that the figures presented can be
subject to change.
We are being asked to prove the valuation of Horsehead, when the company has not even filed
its audited year end 10K - a statement that all public investors are used to seeing, and count on
with accounting oversight and with the legal responsibility that comes with filing a 10K.
In this regard, I ask you to also note the various statements in their joinders where the other
shareholders called up the company to find out what was going on, and they were told by Ali
Alavi, their director of investor relations that they should rely on the public filings of the
company. Except that the company is not making that information available.
So on the one hand, the company is telling its shareholders to rely in its statements and public
filings, and on the other hand it is not providing the information we need. And when it does

Guy Spier
provide information to this court, their statements are surrounded by hedging language that these
are estimates, and should not be relied on, and do not have the blessing of their auditor, or the
scrutiny that comes with a filing from the SEC.
It does not appear right to me that the court should require us to prove valuation when we do not
have access to reliable data, and moreover, the company itself is not willing to certify the little
data that it is providing. That’s just not fair. You are sending us into a punching match with a
Mohammed Ali with one hand tied behind our backs.
But there is also the broader point: If you deny an equity committee, you will be giving a
blessing to the debtors and the creditors actions. Effectively, you will be saying that it is all right
for a company to declare bankruptcy, to shut down substantive communication with the
shareholders, and then to rely on its own, unaudited, and heavily hedged reports to justify a low
valuation that deprives the shareholders of their ownership interest in the company.
It cannot be right that you can bless a situation where the fox is watching the hens.
2. The KPMG report is flawed.
First of all, let me state simply: KPMG report is not flawed. KPMG is a big four account and has
a reputation to protect. The validity of the report is patently obvious to anyone who reads it. Can
one disagree with the assumptions? Of course. But the KPMG report takes great pains to show
that their assumptions are reasonable and that they are based on independent and reputable third
parties.
Now of course the debtor and the secured creditors want to take the most conservative possible
assumptions, and of course they want to disagree with the KPMG report. But it is not flawed. It
is a perfectly valid valuation report – one that any one of the debtor and or the creditor would
have attested to and supported were they interested in showing a richer valuation.

Guy Spier
In regard to assumptions, I would like to go into one misconception of the US Trustee – who in
their objection to our motion state that the KPMG report does not reflect current conditions. The
US Trustee contends that the ebitda multiples are too rich. That betrays a fundamental
misunderstanding of valuation in cyclical industries. For it is well known and well understood
amongst investment analysts that cyclical industries show their highest ebitda multiples at
cyclical lows, and their lowest ebitda multiples at cyclical highs. This may be counter-intuitive,
but it makes sense. Because markets and rational actors are forward looking. To value a business,
analysts look to normalize the cyclical nature of the business under examination in order to think
through where the company stands mid-cycle. Not at the peak, and not at the trough. The debtor
and the secured creditors seem to have convinced the US trustee and others that at a cyclical low,
multiples have to be low as well, when it is the exact opposite.
Your Honor, the KPMG report represents is a perfectly valid valuation of Horsehead. One that
any purchaser would use in deciding how much to pay for the business.
3. Book value not a guide to valuation.
Let me also state. This court cannot ignore the whole world of accounting and Generally
Accepted Accounting Principles. If book value is not a guide to valuation, then what is it? I
would like to remind the court of Benjamin Graham, the author of the Intelligent Investor. He
built a very successful investment career and mentored Warren Buffett based on the simple idea
of valuing companies based on book value which is widely recognized as a guide to business
value.
So if book value does not represent a first approximation of the value of the company, then what
is it? Just an irrelevant number? And what does it mean when a company takes a write-down on
its assets? Or when a company writes up its assets, or re-values its assets on the balance sheet?
In the world outside of the bankruptcy courts, book value is most certainly a guide. A first
approximation of the value of the business. I believe that your court understands book value and

Guy Spier
the economic importance of these numbers. Bankruptcy court cannot be a place where these
numbers are just ignored. It seems, your Honor, that this is the claim that the objectors are
making.
And here is the most important point that is ignored by the objectors. If the Mooresboro plant
was so impaired: if business was so bad, why did they not take a write down? In this case, the
relevant accounting standard is SFAS 144. This is a widely available accounting standard. One
that I assume the court is aware of.
Here is the relevant quote:
Under SFAS 144, “impairment is the condition that exists when the carrying amount of a
long-lived asset (asset group) exceeds its fair value. An impairment loss shall be
recognized only if the carrying amount of a long-lived asset (asset group) is not
recoverable and exceeds its fair value.”
SFAS 144 then goes on to determine how that is calculated and when it is applied.
As I said in my motion, the company did not recognize a write down of their assets. I just want to
repeat that to you: All the way up to the bankruptcy filing, the company did not recognize a
write-down in the carrying value of Mooresboro.
Any disinterested observer cannot rule out the possibility, or should I say the probability that the
debtor did not write down the value of Mooresboro because they did not believe that it had been
impaired.
In other words, the debtor’s own actions prior to bankruptcy are utterly inconsistent with what
they are now claiming in bankruptcy.

Guy Spier
If the debtor wants to claim, as they do that more than $400 million of value was inexplicably
wiped out since the their last audited 10q, and since their bankruptcy filing, then at least this
court should make them go to their auditors to do an official write down of their assets. I wuold
expect that the auditors will refuse write down the assets because they did not meet the
accounting test. A write down of the only assets happens when there has been an “other than
temporary” impairment of the value of the asset. And it is clear that teething problems in getting
a plant up and running, as well as a temporary decline in the price of zinc (which has already
reversed itself) is very much temporary.
Bottom line is that I don’t think that the accountants would agree to write it down.
And if the debtor managed to convince the auditors to do a $400 million write-down, then I
would want to read in the footnotes why this happened. What if the auditors write in their
footnotes that the decline in the value of the business had little to do with their temporary
problems before bankruptcy and a lot to do with the actions that the management took after
bankruptcy?
Your Honor, if the company had made statements prior to bankruptcy that their plant was
impaired, if the company had taken a write-down, then their claims that the business is worth so
little would be believable.
But they were saying the opposite before bankruptcy. So are you now willing to accept their
claim that the business is worth so little without challenge? If this was a valuation fight between
two equal parties – with equal resources where they are allocating the pieces of the pie, then
perhaps.
But as it is, they are seeking to use your court to extinguish our state-law property rights. As
such, I submit that you ought to move very slowly and carefully to make sure that our property
rights are not being unfairly taken away from us.

Guy Spier
For this reason, it would be just and fair to level the playing filed by granting us an equity
committee.
4. The trading valuation of the debtor’s securities proves the objecting parties point.
The debtor has charts in their submission showing that the market was already marking down the
value of the company’s securities prior to bankruptcy thus indicating insolvency. Your honor,
they are wrong. They seem to be implying that the market is efficient – that it accurately reflects
all available information. But that is a theory that has been thoroughly debunked many times.
Security prices move for all sorts of reasons. They move because of liquidity reasons and also
because of cycles of fear and greed not to mention market sentiment. It regularly occurs that an
irrational seller is selling an illiquid asset and that its price goes down while he is selling only for
it to go back up once he stops. The idea that the market prices of the securities is a guide to value
at all times is risible and naïve.
But in this regard, what is certainly not naïve is that the precipitous drop in the market price of
the debtor’s shares around the bankruptcy was the result of the realization within the equity
markets that the ad-hoc group had gotten a hold of Horsehead, and that their intent was to grab as
much value as they possibly could. And while this explanation of that precipitous drop may well
be true, that does not make it fair or right, or the correct outcome in this case.
As I stated in the motion, the court should guard against circular reasoning. The court cannot
deny our motion and allow the creditors to continue in their current course of action simply
because they have been very successful to date.
In other words, just because the wolf has half-swallowed the rabbit does not mean that this court
should give it the right to eat the rabbit. In this analogy, the rabbit is Horsehead and the ad-hoc
creditors are the wolf.

Guy Spier
My point to you is that we are being asked to prove that the rabbit is alive when the wolf has half
swallowed it. Well, if you allow the wolf to swallow it, of course it will die. But if you allow us
to pry open the wolfs jaws and stop it from swallowing the rabbit, then you will see that the
rabbit is very much alive.
A word on Spansion.
The objecting parties have cited the Spansion case a number of times in their objections. Before I
go into Spansion, you should know that I am at a substantial disadvantage to the other parties.
Not least because I have a day job which does not involve fighting Kirkland and Ellis on a daily
basis and I have been doing this work in my spare time. But also because I don’t have access to
Lexis Nexis and the body of case law upon which your court bases its judgements. And so when
the objectors cite Spansion, or Exide, it has been hard for me to get a complete statement of the
facts of the case and the judgements rendered in order to fully understand the precedent and to
argue it.
But based of the fragments of the case that are available on the internet I would like to point out
the following distinction in the Spansion case: In Spansion, we are talking about the valuation of
a participant in the semiconductor industry. It is a fast moving industry, in the midst of rapid
technological change where prices drop every year and technologies that are in demand today
can easily be obsolete tomorrow. It is an area where patents and intellectual property are subject
to disruption and where projections are certainly difficult and uncertain.
In the case of Horsehead, we are not talking about an industry with rapid technological change –
where a company’s whole product line can be obsolete within a matter of years. We are talking
about zinc metal. Where there are tried and tested processes that have been around for decades
and whose economics are well understood. With Horsehead we are talking about industry and
plant economics that are not subject to rapid, dynamic change.
The court needs to make this important and relevant distinction.

Guy Spier
I can accept that the judge in Spansion was right to deny an equity committee based on an overly
optimistic forward looking valuation that made all sorts of uncertain assumptions – because of
the extreme uncertainties in the semiconductor industry.
But that is emphatically not the case here.
Let me repeat. Spansion does not apply because the fact of the case are not analogous. In this
case, predictions about the future can and do apply – because the industry economics are simple
and unchanging. For this reason, Spansion is not a precedent for the case that we have before us
today.
Valuation and substantial likelihood of recovery to the equity
Your Honor, I understand full well that in circumstances where the equity is out of the money,
then awarding an equity committee would be an unjustifiable gift. And I understand that this is,
at its heart, the point that the objectors to the motion are making. Their claim is that there is no
value to the equity, and allowing an equity committee would unjustifiably burden the estate. And
that, to the extent that we were to exercise nuisance value, that would enable us to extract
something out of this situation that would not be ours to claim given the rule of priority that
exists in bankruptcy.
But given the proper resources: The ability to challenge their assumptions. To gain information
from officers of the company. To force them to be honest and reveal all the facts. To have the
resources to be present in a persistent way in this bankruptcy case, then we will be able to
demonstrate substantial recovery to the equity.
But let me state emphatically. If my prior arguments on valuation have not convinced you, then
we are unlikely to be able to demonstrate substantial recovery to the equity if you do not allow us
the resources we need to demonstrate it.

Guy Spier
You should know that I learned from an informal conversation with counsel for the UCC that
one option would be for you to dismiss our motion without prejudice. In other words, that you
might decide to base your decision on this motion on the narrow confines of the Spansion, and
Exide, and deny this motion without prejudice, meaning that we could theoretically come back at
a later date and make our case.
But you should know, and I want to state this with emphasis, that this is not an option for us. We
face enormous obstacles of organization, of resources, and of information. This is the end of the
road for us. Telling us that we can come back and mount a valuation fight while denying us the
resources to do so is no different to denying us an equity committee.
In saying this, I am fully cognizant that granting an equity committee would introduce an
inefficiency into this process, and that it would burden the estate. Of course it would, but as we
know, that is the nature of justice and due process.
Even if you decide, like the US Trustee that we have not (yet) met the burden of showing a
substantial likelihood of a recovery to the equity, you have to accept, at minimum, that we have
done a great job with the information and resources that we have at our disposal. And you have
to allow for the possibility, and I would argue that it is a high probability that, given a level
playing field, we would be able to demonstrate that value.
And given the stark contrast between the debtor’s actions and behavior pre and post-bankruptcy.
The optimism with which they talked about the business pre-bankruptcy and the sudden shut
down in communication and the pessimism of their submissions and statement subsequently, is it
so wrong that we burden the estate with an equity committee that can properly represent our
interests, which can carefully examine the debtor’s statements, their data and their witnesses?
Even if the probably that we win a valuation fight were, in your judgement, less than 100%
would it not be just to allow us a fair chance?

Guy Spier
I am only asking the court to give us the opportunity to prove that.
In considering this, I would like you to take into account some incontrovertible facts that I do not
think are subject to dispute by any party to this case.
1. At no time prior to the bankruptcy did the debtor make any statements that pointed to the
impairment of their business or of Mooresboro. Instead they repeatedly pointed to
difficult trading conditions, but frequently reassured us that they had sufficient liquidity
to get through 2016.
2. At no point prior to bankruptcy were they required by their auditors to take an asset write
down.
3. When the company entered technical default on their Macquarie line, they stated that they
would make the required payment by the end of the month.
4. On the first day filings, the creditors revealed that while they were unwilling to work with
the company to cure a discrepancy in the value of their collateral, they were, however,
willing allow a primed $90 million DIP Loan while at the same time not allowing the
equity a chance to fund the company through a rights issue, or similar. Thus the same
secured lender that did not consider a rights issue to bring in new equity capital allowed
itself to be primed via a $90 million DIP.
Forgive me for repeating myself. But I want to make this point again:
5. At no point did they come to the equity owners and announce the need for more capital.
At no point did they announce a rights issue, or make any statement of the need for cash.
And in their plan of reorganization, they shut out the equity, and reserve for themselves
only the right to invest in the business.

Guy Spier
Does this seem to you like the actions of someone who is hopelessly insolvent? Or does this
seem like something else? Because to more than 1,000 shareholders and many other observers, it
seems like something else.
And I submit to you that even if you have one iota of a doubt as to the objecting parties claims
regarding no recovery to the equity, I think that the right thing for the court to do is to find in
favor of our motion. Not to do so would be to be acting in far to cavalier and a precipitous
manner with regard to depriving us of our state law property rights.
I would also like to note; your Honor is that we are not asking you to deprive the creditors of
their right to 100% recovery. We believe that if you allow an equity committee, we will be able
to bring about a course of action for the debtor that will result in 100% recovery for them and
enable us to remain as owners of the business.
That would happen through selling Zochem and Inmetco, and then doing a rights issue, along
with a potential swap of the unsecured debt for equity.
Some glaring inconsistencies in the debtor’s actions when it relates to valuation.
Your Honor, I want to reiterate a few of the inconsistences of the debtor’s actions, which to my
mind are extraordinarily revealing.
Announcements prior to bankruptcy
Note that when the company went into technical default on the Macquarie loan in January of this
year, they did not make an announcement to the market that the company was in danger of
insolvency. Nor did they solicit the shareholders for more money. They did not announce to the
shareholders or to the market that unless they came up with more money, they might have to file
for bankruptcy. Instead, they told the market that they were within the grace period and that they
would make the required payment of $1.8 million by the end of the month.

Guy Spier
Rights Issue
If the debtor is claiming that the value is so low, and that there is hardly recovery for the
debtholders, why would they not allow the equity to participate. You would think that they
would welcome our willingness to put fresh money into this. Instead, they shut us out and put
together a plan that only allows accredited investors to participate.
Are these the actions of a corporation that really thinks its value is so low. If they truly disagree
with us, they should allow us to put our money where our mouth is. Allow us to participate.
Allow us to come up with fresh capital.
Appearance of the members of the Ad Hoc Group on the shareholder list.
At the time of and up to the bankruptcy filing, various members of the ad-hoc group owned
shares. Does this strike you as the actions of someone who does not believe in the value of the
business? Moreover, one member of the ad-hoc group owned a dominant position at all levels of
the capital structure.
And if the value of the business is so low, why would they have put an additional $90 million
into it? Why not solicit the shareholders to put money in? You don’t put $90 million into a
business you believe has failed..
DIP Facility
Now consider the way that the company sought to remedy the situation. Rather than seek money
from the equity holders. Rather than make an announcement to the market that they were in dire
need. they filed for bankruptcy with a proposed $90 million DIP facility.
Sale of Zochem and Inmetco
Why has the debtor not vigorously marketed Inmetco and Zochem for sale so that they can use
the proceeds to pay down debt. Why would the debtor not share information about the health of

Guy Spier
Zochem and Inmetco and advertise it widely? Instead, it seems to me that they are keeping
enormous amounts of information to themselves.
I am aware of at least one buyer that would be very interested in Zochem. Why not sell it to pay
down debt at par?
To me and to many observers, the pattern of facts is extraordinarily consistent an attempt to gain
control of valuable assets through the backdoor of the bankruptcy court. By contrast, an equity
committee would provide us with the ability justly restructure the company’s obligations in the
manner actually intended by the by the bankruptcy code.
Other bases of action for you to enter an order for an equity committee.
In urging you to take this action, our opponents will plead with you that while all of the above is
surely heartbreaking, the law is the law and that your only course of action is to take a narrow
view of Spansion and of the existing case law and that, therefore, no matter how much sympathy
you find with our motion, you have to find against an equity committee.
As I have mentioned above
1. I submit that we meet the valuation criteria established in Spansion.
But if the court finds that we do not meet the Spansion criteria, I submit to you that
2. Spansion does not apply in this case.
But I would also like to plead with you that, separate to valuation, as a court of equity, you have
are other grounds to grant us an equity committee.

Guy Spier
Your court cannot be used to side-step SEC rules of fair disclosure.
I hope that it has become clear to you from the facts already presented that there is an
extraordinarily high likelihood that prior to bankruptcy, the company violated SEC rules of fair
disclosure. The company clearly did not communicate numerous and important material facts to
the market.
Several class action suits in this regard have already been announced, and it is only a matter of
time before a complaint is filed – in a Delaware court.
Given the very strong prima facie evidence for these violations, it should be clear to this court
that the debtor’s bankruptcy filing is an extraordinarily fortunate way for them to whitewash this
behavior and to leave any claims that are proven against the estate, while the debtor goes on,
with your blessing, unburdened by their past misdeeds.
This is a form of fraudulent conveyance. Pile on in your violations of all sorts of rules prior to an
intended bankruptcy filing in the knowledge that you will be made clean by the bankruptcy
court.
The facts clearly point to this, and I am pointing this out to the court
Your Honor, I submit that the US Bankruptcy court cannot be a venue where debtors’ pre
bankruptcy violations of law are whitewashed. Not only is it unfair and unjust. It thwarts the
extraordinary work done by the SEC, and by those people who legislated the SEC protections for
public investors. Allowing the debtor to whitewash their actions in this case would only
encourage others to do the same thing. It would be a bad decision and it would encourage bad
behavior.
Your Honor, please also note that in this matter, we do not have recourse in another venue
because it would be too late to obtain any real redress.

Guy Spier
Your Honor, if we have not convinced you on valuation, it seems to me that this is a very solid
basis for action on your part. And if I had the time and the access to the case law, I would like to
believe that I would have found precedents that would give you a solid and legal basis for
allowing an equity committee.
Your court cannot be used to sidestep the Court of Chancery.
Your honor, in parallel reasoning to the above, I submit that the creditors have unjustifiably and
precipitously taken control of the debtor, but without having to go through an annual meeting,
without having make the customary filings and get the requisite permissions. It is clear to me,
and I submit to you that they are using the guise of Bankruptcy to sidestep all of the protections
put into place regarding corporate control. The shareholders had a right to know that there was a
new master in the house, and that the new master was seeking to gain control of their
corporation. That is the reason why investors have to file 13d and 13g filings. That is the reason
why when you seek to acquire 100% of the shares of a corporation, there are announcements that
have to be made, and permissions that have to be granted.
None of these happened in this case. If you allow a course of action that extinguishes the equity
in Horsehead, you will have granted the debtor and the secured creditors a de facto pass on all
these rules.
The Bankruptcy Court is there to help insolvent companies to reorganize or to liquidate under its
protection. It is not there to rubber stamp a change in corporate control.
I would like to draw to your attention to the fact that, in spite of stating that we are willing to
provide more financing, and that the company can raise cash by selling Inmetco and Zochem, we
have been shut out. Does that look to you more like an insolvency, or does it look like an attempt
to subvert and sidestep investor protections regarding corporate control?

Guy Spier
Your Honor I submit that if you find that you cannot grant our motion on any of the basis
mentioned above, this also provides a very solid basis upon which you would grant us an equity
committee.
US Bankruptcy Court does not operate in a vacuum
Your Honor if you allow the bankruptcy proceedings to continue on their current course the
basic result is that you will be giving your court’s blessing to all those activist investors who
seem to want to use bankruptcy as a way to sidestep the investor protections that have been built
up for the public markets.
The message you would be sending to rich and powerful activist funds everywhere is that if you
can’t get what you want because of the protections provided in the public markets, find an
excuse, or orchestrate a reason why a company should file for bankruptcy, and then all your
wishes will be granted.
Such a decision would set a chill on the appetite of individual investors to take risks and to fund
growing businesses. It would raise the cost of capital in the United States and make its capital
markets less efficient. It would make the United States a less attractive place to do business.
And it would be rewarding what is at best, mercenary behavior and at worst, perhaps unethical,
or illegal behavior.
Discovery and a high standard to be placed on the debtor and the secured creditors
Your Honor, I hope that I have at least presented you with at least a reasonable suspicion that
this is not just an ordinary bankruptcy proceeding. And that we are not just a group of embittered
shareholders, who refuse to accept that the company we invested in has no value. That it has now
filed for bankruptcy and its equity is worthless.

Guy Spier
I hope that I have raised some very real questions in your mind as to the behavior of the debtor,
and of the secured creditors. Behavior which, if you do not grant our motion, would ultimately
be whitewashed.
There are numerous other questions that we have as shareholders which I believe we have the
right to get to the bottom of.
For example, when did the debtor became aware that shareholders had also become creditors and
were exerting a dominant influence on the company? Why was this not a material fact to
communicate to the market?
When did the company begin discussions with Kirkland and Ellis and with Lazard. The
announcement that they had been hired came less than a few short days before the bankruptcy
filing. Why did that announcement come so late?
Because I do not believe that those elaborate filings were prepared in such a short time. I believe
that we have the right to know.
My point to you is this. If the debtor and the secured creditors want to make the claim to you that
normal shareholder protections were not violated, I think that the shareholder have the right to
find out, through discovery, if that, indeed, was the case. They should bring the evidence that
they are not misusing the US bankruptcy court. Anything else would allow a de-facto subversion
of the SEC protections for public investors.
An equity committee would allow that process of discovery to occur.
Again, I believe that extinguishing the state law rights of the equity holders is not something that
your court should take lightly. And given the pattern of facts that I have pointed out, I think that
the court should be extraordinarily careful in case a big injustice occurs.

Guy Spier
Granting an equity committee would allow us to properly investigate and understand if the
debtor and the secured creditors were fully within their rights, and fully complied with the law,
or, as we believe they were not.
The Beauty of the Common Law
Your honor, I do not have access to the law, or knowledge of the law to be able to give you the
proper alternative legal basis for the granting of an equity committee if we do not succeed
through valuation, but I strongly believe that the basis for affirmative action on our motion exists
within the common law.
As a student, I spent two years studying law at Oxford. It was British Law. Even though the
United States left the commonwealth, and the Napoleonic Code is also part of North America’s
legal tradition, the United States and the United Kingdom both share in a common law system
which is considered by many to be one of the crowning achievements of Western Civilization.
The Common Law provides an extraordinary balance between precision and justice. Precision is
key, because in order to engage in productive economic activity, people need to know what the
law is. But at the same time, the law needs to be fair – not just treating like cases the same, but
also allowing for justice in specific circumstances.
I hardly need to take your time regarding matters of jurisprudence. But here is the salient point:
If I , or a legal expert working for me would have had the time and the resources to study the
case law (Lexis Nexis is very restrictive on providing access, and I have a fund to run), I am
quite certain that we would have been able to find you the legal precedents for you to enter an
order to provide an equity committee.
Summary
Your Honor, this bankruptcy has lead into some valuable discussions with various experts in
bankruptcy including Diane Dick who is a professor of law at Seattle University. My discussions

Guy Spier
with her have only reinforced the legal and moral validity of our quest for an equity committee in
this case to achieve adequate representation.
Simply put, without an official committee to advocate on our behalf, this case has the potential to
violate all of the fundamental principles that supposedly govern both the financial markets and
the bankruptcy system.
In saying this, I have learned of what some used to call the “goldfish bowl quality” of
bankruptcy. I.e. the capacity of the bankruptcy process to put the debtor’s operations under an
unfair and glaring light.
Also, bankruptcy requires much more disclosure, including opportunities to examine debtor’s
officers, than is generally required in non-bankruptcy financial reorganization. This is because,
as we all know, only in bankruptcy can state law rights be legally compromised, through the
automatic stay and cram down.
For these reasons, I have learned that the drafters of the Bankruptcy Code expressed repeated
concern for the vulnerable position of a debtor’s public equity investors.
1. For instance, the legislative history reveals that Congress believed it was “essential for
the public to have legislative assurance that their interests will be protected,”1
and that “such
assurance should not be left to a plan negotiated by a debtor in distress and senior or institutional
creditors who will have their own best interest to look after.”2
2. Recognizing the unique collective action obstacles faced by shareholders, the drafters
hoped that the appointment of an official equity committee in appropriate cases would counteract
the tendency for debtors to appease creditors at the ultimate expense of shareholders. These
1
S. REP. NO. 95-989 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5796.
2
Id.

Guy Spier
protections were viewed as especially necessary during bankruptcy, as reorganization
proceedings are “literally the last clear chance to conserve for [shareholders] values that
corporate financial distress or insolvency have placed in jeopardy.”3
3. The drafters ultimately adopted the discretionary standard for the appointment of official
equity committees in recognition of the fact that many companies in bankruptcy are hopelessly
insolvent, and that an equity committee would, in those circumstances, simply impose additional,
unnecessary costs.
4. But in cases such as Horsehead Holdings, where the most recent disclosures suggest
considerable equity value and the debtor has not disclosed enough to suggest a major departure
from those figures, it seems clear that the drafters would have wanted the court to err on the side
of appointing an official equity committee.
5. Otherwise, Your Honor, the court would basically be saying that—notwithstanding the
debtor’s own first day filings that claim nearly half a billion dollars of equity—the company’s
shareholders must overcome a truly impossible hurdle in order to obtain an official committee:
a. they must put forth a successful valuation trial and
b. they must do this without the benefit of professional advisors who are being paid by the
estate, and with only a few days to even simply digest the debtor’s plan-related disclosures.
In reading the legislative history of the Bankruptcy Code, this cannot be what the drafters
intended. Nor does this seem to be at all fair or equitable.
3
S. REP. NO. 95-989 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5790.

Guy Spier
Conclusion
Your Honor, I urge you to consider this case from the public investor’s perspective. Please do
not allow bankruptcy to overturn the investment-backed expectations of the company’s public
equity investors, who—on the basis of the company’s own public disclosures—are entitled to a
seat at the negotiation table and require an official committee for adequate representation.
Respectfully submitted,
Guy Spier

Horsehead Holdings: Guy Spier Submission to Judge Sontchi

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