STEUBENVILLE - A federal bankruptcy judge is giving bankrupt RG Steel two additional weeks to find buyers for its operations in Maryland, West Virginia and Ohio.
Initially, the company had been given until July 27, when its bankruptcy financing agreement expired, to identify potential buyers because the lenders owed roughly $450 million and with liens on most of RG Steel's assets - wanted a quick sale. The company's unsecured creditors, however, objected, saying the rush to close a deal could end up costing the company financially.
On Thursday, attorneys for RG Steel and the creditors committee told the judge they'd agreed to extend the financing agreement to Aug. 10. If the company can line up what's known as a "stalking-horse bidder," the financing agreement would be extended through Aug. 24.
A stalking-horse bid is when a bankrupt company chooses one potential buyer to tender the initial offer - essentially the benchmark bid - for the purchase of its assets, after which other potential buyers can submit competing bids. The process allows the bankrupt company to avoid being low-balled.
"This is not a company that a year would be an appropriate time to sell, on the other hand, 60 days felt quite tight," said Matthew Feldman, an attorney for RG Steel.
The Associated Press said RG Steel Attorney Shaunna Jones told the court Aug. 24 "would be our absolute drop-dead date to have a sale to close." Qualified bids would be due by July 25 and the company would have until July 30 to designate a stalking-horse bidder. If no stalking-horse bidder is identified, an auction would be held the following day.
On the other hand, if a stalking-horse, or lead bidder, is designated, the auction would be delayed until Aug. 21.
Objections from several other creditors, including the Pension Benefit Guaranty Corp., also were resolved, RG Steel's attorneys told the court. PBGC had objected to the original bidding procedures because they fialed to take into account whther a bidder was willing to assume RG Steel's pension liabilities. PBGC had said pension plans covering more than 1,300 employees and retirees have an estimated unfunded liability of about $70 million.
Under the revised procedures, qualified bidders will have to say whether they intend to assume any or all of the pension plans sposnored by RG Steel at its Warren and Wheeling divisions, and that the pension liabilities would factor into any bid valuations.
RG Steel's parent company, Renco, bought the steelmaking operations just over a year ago from Russia's Severstal NA for $1.2 billion. Plagued by liquidity problems blamed in large part on raw material costs and compounded by low steel prices, RG Steel sought Chapter 11 bankruptcy protection on May 31.
RG Steel has filed suit against Severstal in New York, seeking $82 million in damages from the Russian company for allegedly misrepresenting working capital and contractual issues.
United Steelworkers union Local 1190 President Ernie Gambolin and USW Staff Representative Santo Santoro could not be reached be reached for comment this morning.