RG Steel Negotiates Global Settlement With Severstal

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RG Steel LLC, once the fourth-largest flat-rolled steel producer in the U.S., negotiated a global settlement with U.S. subsidiaries of OAO Severstal, from which it purchased the Sparrows Point facility that had been the company’s main steel-making facility.

Four lawsuits were outstanding between RG and Severstal, in addition to Severstal’s claim in RG’s bankruptcy. The claims and counterclaims revolved around disputes concerning the Sparrows Point purchase agreement.

Severstal is to pay $30 million, each side releases the other, and all litigation stops. The settlement is up for approval on July 15 in U.S. Bankruptcy Court in Delaware.

Among other things, RG owed Severstal $100 million on a note dating from the acquisition. RG claimed Severstal owed $82 million for a working capital shortfall when the business was sold.

RG filed for Chapter 11 protection in May 2012, sold most of the assets, and paid off financing for the bankruptcy along with first-lien debt. The plant in Sparrows Point, Maryland, brought the highest price, $72.5 million. The Ohio plant was worth $16 million, and the Wheeling Corrugating division went for $7 million. For a rundown on other sales, click here for the Aug. 16, 2012, Bloomberg bankruptcy report.

RG had been capable of producing 8.2 million tons a year. Renco Group Inc. controlled 75.5 percent of RG from an acquisition in March 2011 from Severstal. An affiliate of Cerberus Finance LLC is a minority shareholder.

The petition listed assets and debt both exceeding $1 billion. Liabilities included $440 million on a senior revolving credit with Wells Fargo Capital Finance LLC as agent.

There was $218.7 million outstanding on a second-lien revolving credit with Cerberus Finance as agent. Parent Renco was owed $130.5 million on subordinated notes.

The case is In re WP Steel Venture LLC, 12-bk-11661, U.S. Bankruptcy Court, District of Delaware (Wilmington).