Written by: Sandy Williams
Creditors of bankrupt RG Steel are seeking court permission to sue Renco Group founder and billionaire Ira Rennert for deliberately delaying the bankruptcy filing of RG Steel in order to protect his own financial interests.
RG Steel and its affiliates are 75 percent-owned by Renco, with the remaining equity owned by Cerberus RG Investor LLC. According to court documents, Rennert persuaded Cerberus to provide $215 million in financing in exchange for 24.5 percent of Renco’s interest in RG Steel. A deal the Official Committee of Unsecured Creditors alleges Rennert made in an attempt to avoid potential liability for RG Steel’s underfunded pension plan. The transaction, however, did not alleviate the financial crisis facing the steelmaker and the delay and additional debt, taken on by RG Steel under Rennert’s direction, led to a reduced value in RG Steel’s coke-supplying joint venture.
Court documents filed by the attorney for the committee alleged that Rennert was responsible for saddling RG Steel with hundreds of millions of additional debt that the company would be unable to repay.
“Rather than take the obvious course and file for bankruptcy protection, as advised by counsel, which would have been in the best interests of the Debtors and allowed for an orderly liquidation and sale of the Debtors’ assets,” said court papers filed by the committees attorney, “Rennert chose to layer on more debt with no real hopes of solving the Debtors’ financial problems but only of potentially avoiding his own underfunded pension liability.”
The committee hopes to recover $238 million from Rennert but needs authority to pursue litigation because it does not believe RG Steel will pursue the case on its own since the claims are against its sole equity owner and controlling manager.
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