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Herman Strauss to make bid for city land

112-acres previously owned by RG Steel

June 6, 2012
By LINDA HARRIS - Business editor ( , The Herald-Star

STEUBENVILLE - Wheeling-based Herman Strauss Inc. is making a bid for a 112-acre parcel of land that bankrupt RG Steel had owned at Third and Bates streets in Steubenville.

This morning, Strauss Chief Financial Officer John McDonald confirmed Herman Strauss and an Ohio limited liability company, River Rail Development, had submitted a bid of $15 million for the property, which includes the buildings, equipment and scrap metals stored there as well as the site itself.

The proposed sale must be OK'd by U.S. Bankruptcy Court in Delaware, however. The deadline to submit competing offers is at 5 p.m. June 20.

"We need to expand our business," McDonald said. "Herman Strauss is one of the oldest recyclers, if not the oldest recycler, in West Virginia. We're just looking to expand our business."

McDonald said the firm's current operations are in West Virginia, "we're looking to expand our business opportunities on that site."

Plagued with liquidity problems, RG Steel sought Chapter 11 bankruptcy protection on Thursday. In its filing, the company indicated it would seek buyers for its holdings in Maryland, West Virginia and Ohio.

RG has blamed its financial problems in part on Russia's Severstal, from whom the mills were purchased in 2011.

Severstal, listed as RG Steel's largest unsecured creditor at $36.54 million, sold the former Wheeling-Pittsburgh steel holdings in the Ohio Valley as well as Sparrows Point, Md., and Warren, Ohio, to the Renco Group, RG Steel's parent company, in March 2011.

RG has filed suit against Severstal for an alleged $82 million shortfall in working capital experienced immediately after the sale.

Without the working capital shortfall and what RG called Severstal's misrepresentations and contractual breaches, RG said its liquidity crisis "may have been surmountable."

The two steel giants are battling in New York state court.

Coke producer Mountain State Carbon LLC was the second largest unsecured creditor at $22.4 million. Mountain State, a 50-50 joint venture between RG Steel and Severstal units, provides 600,000 tons of coke annually to the Warren mill.

London-based Balli Steel PLC was third on the creditors list at $15.77 million, followed by iron ore supplier Cleveland Cliffs at $10.86 million.

Tube City IMS LLC was fourth and last of RG Steel's eight-figure creditors at $10 million.

Rounding out the top 10 were Phoenix Services LLC at $9.74 million; Baltimore, Md., County, $4.5 million; Steelworkers Health and Welfare Fund, $4.33 million; the Ohio Department of Taxation, $3.9 million; railroad Norfolk Southern, $3.28 million; and electric utility Ohio Edison, $3.21 million.

Other creditors include Air Products and Chemicals Inc., $2.9 million; North American Refractories Co., $2 million; Praxair Inc., $1.69 million; and Harsco Metals Americas, $1.65 million.

ESM Group Inc. was the 30th largest unsecured creditor at $1.63 million.

Unsecured creditors typically are vendors, utilities and others that provide goods and services but can't claim assets for payment, as secured creditors can do.

RG Steel listed more than $1 billion in both assets and liabilities in its bankruptcy filing.

Meanwhile, a union leader says more than 260 workers have been laid off as RG Steel prepares to shut down its plant in Warren.

United Steelworkers Local 1375 President Darryl Parker said the workers' last day was Friday.

Some of the plant's operations have been idled. About 500 more employees are still working but likely face layoffs as the shutdown process proceeds.

A spokeswoman says RG Steel is filling existing orders but isn't accepting new ones.

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