Judge Approves Sale Of RG Steel Assets At Sparrows Point
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BALTIMORE/WILMINGTON, Del. (WJZ/AP) — Going, going… gone. A judge has approved a winning bid in the auctioning of RG Steel in Sparrows Point.
Alex DeMetrick reports it’s a bleak development that may just hold a glimmer of hope.
A federal bankruptcy judge in Delaware has approved the sale of assets of the steelmaker in Ohio and Maryland.
The sale orders approved Wednesday by U.S. Bankruptcy Judge Kevin Carey include the $72 million purchase of the Sparrows Point steel mill near Baltimore to Hilco Industrial, a company that specializes in industrial liquidations.
RG Steel said it began having substantial liquidity problems last year as steel prices sank while raw material prices remained at peak levels, and that it also faced significant setbacks in restarting its Sparrows Point factory. A blast furnace there was idle when Renco acquired the former Bethlehem Steel facility from Russian-owned Severstal North America in a $1.2 billion deal that also included plants in Wheeling, West Va., and Warren.
Meanwhile, Carey also approved the sale of RG Steel’s assets at its Yorkville, Ohio, facility to Esmark Steel Group. Esmark bid $4.75 million for the Yorkville assets last month, agreeing to offer jobs to at least 230 employees at the site. Esmark offered an additional $400,000 for mineral interests related to the Yorkville sale.
Carey also was asked to approve the sale of RG Steel’s Warren, Ohio, facility to Pennsylvania-based C.J. Betters Enterprises for $16 million. Betters has said it would like to restart operations at the Warren mill.
Not all that long ago, steel-making at Sparrows Point made the mill a billion-dollar operation. At auction, it went for $72.5 million.
“Everybody thought they had a perfect job there, but it went bankrupt on them,” Jimmy Iman, a former steel worker, said.
RG Steel was in trouble last winter. The nation’s fourth-largest flat-rolled steel manufacturer sought bankruptcy protection in late May, citing financial struggles with low steel prices and high raw material costs.
Since the bankruptcy filing, RG Steel has been working to sell off assets in order to satisfy secured lenders who are owed some $450 million and have liens on virtually all of the company’s assets.
RG Steel, which had an annual production capacity of more than 8 million tons, was formed in March 2011 as a wholly owned subsidiary of the privately held Renco Group. The company sought bankruptcy protection a week after announcing it would idle factories in Maryland, West Virginia and Ohio and lay off thousands of employees.
Closing down had 2,000 Maryland workers applying for unemployment when the state helped secure a loan to keep the plant open.
“And get our steel workers back to work at Sparrows Point,” Gov. Martin O’Malley said at the time.
“Everybody back to work is definitely good news,” one steel worker said.
“I’ve been on pins and needles wondering if the plant was going to survive,” said another.
But the sale to Hilco, which dismantled and sold-off Borders, made survival look bleak. But not hopeless.
“A plant like this with one of the best blast furnaces in the world and ocean-access port, one of the best coal mills in the country, that eventually it becomes a no-brainer at these kind of prices for somebody to run this steel plant,” Joe Rosel, president of the local union, said.
And while Hilco may well sell older, unused sections for scrap, the company now says it will look for someone to make steel.
“I think the key is trying to attract a new owner who has a more vertical approach to steel making,” Baltimore County Executive Kevin Kamenetz said.
That means someone who already has the raw materials to make steel, a big expense that doomed RG Steel’s operation.
At root of the optimism is the hope some future buyer will smell a bargain.
“They’re going to get the deal of the century for what they’re going to have to pay for this plant,” Rosel said.
While still far from certain steel will roll again, it might not be the end of the line.
According to a statement by the plant’s new owner, a search will be made to find operators who will reopen parts or all of the steel mill.
Meanwhile, in connection with the sale of the Sparrows Point site, attorneys agreed to establish a $500,000 escrow fund to pay for offshore investigation of water contamination. Hilco and its partner, Environmental Liability Transfer, also agreed to assume RG Steel’s obligations under a water-quality monitoring agreement with environmental regulators.
After a lengthy dispute over monitoring for toxic contaminants at the Sparrows Point site, RG Steel reached an agreement with the U.S. Environmental Protection Agency and Maryland environmental regulators late last year requiring the company to sample sediments no more than 50 feet offshore.
Environmentalists are challenging a federal judge’s approval of the agreement. They contend that contaminants have been found much farther offshore and that the scope of the monitoring agreement, which stems from a 1997 consent decree between environmental regulators and the mill’s former owner, Bethlehem Steel Corp., should be expanded.
(Copyright 2012 by The Associated Press. All Rights Reserved.)