RG Steel files for Chapter 11 bankruptcy protection
Steelmaker RG Steel LLC, which has operations in Wheeling and northeast Ohio, filed for Chapter 11 bankruptcy protection in Delaware on Thursday, a week after announcing it would idle factories in three states and lay off thousands of employees.
RG Steel, based in Sparrows Point, Md., said in its filing that it has more than $1 billion in assets and $1 billion in liabilities. The steelmaker said it wants "breathing room" to pursue a sale.
Sewickley-based Esmark Inc. submitted an offer to acquire RG Steel's Wheeling-Pittsburgh headquarters in Wheeling, along with certain assets of the Wheeling Corrugating business.
RG Steel is the nation's fourth-largest flat-rolled steel producer. Wheeling Corrugating is the nation's leading fabricator of roll-formed steel products.
If Esmark prevails, it would reacquire parts of Wheeling-Pittsburgh, which it once owned.
Russian steelmaker OAO Severstal acquired Esmark's holdings in Wheeling-Pittsburgh Steel Corp., for $1.25 billion in August 2008. In March 2011, Severstal sold much of its vast U.S. steel holdings -- including Wheeling-Pittsburgh mills in West Virginia, and others in Ohio and Baltimore -- to the newly formed RG Steel.
Steel industry veteran James Bouchard of Sewickley started rebuilding Esmark Inc. and its Esmark Steel Group in 2009, buying up steel and related companies in the Midwest and elsewhere. It is building a $9 million, 40,000-square-foot headquarters in Sewickley scheduled to open later this year. Bouchard was not available for comment yesterday.
RG Steel said in court papers that its steelmaking operations are most attractive to potential purchasers as a going concern. The steelmaker said a restructuring would be best for all parties, including its employees.
Wheeling Corrugating's assets would complement Esmark's steel processing and distribution network in the Midwest and Northeast, and expand its steel products used in the agricultural and bridge and high-rise construction markets, said Esmark spokesman Bill Keegan.
Terms of Esmark's offer yesterday were not disclosed. The company wants to close its asset purchase within the next 45 days, said Keegan, adding the company would invest $1 million in plant improvements and equipment.
Steel industry analyst Michelle Applebaum said RG Steel's bankruptcy would have "very little impact" on the steel market and that competitors would "not see any benefit" any time soon.
Applebaum, however, said Esmark had "little credibility," given its barely one-year ownership (2007-08) of Wheeling Pittsburgh.
As part of its offer yesterday, Esmark is working with the United Steelworkers, which represents 4,000 RG Steel workers, including about 2,000 in Wheeling and Warren, Ohio, said Keegan.
Esmark hopes to "preserve this iconic 120-year-old institution and protect as many union and non-union jobs as possible in West Virginia and across the country," Keegan said.
It's unclear how entering bankruptcy protection will affect RG Steel's plan to lay off employees, almost 90 percent of whom are covered under a collective-bargaining agreement with the USW; the agreement expires in September 2014.
The company listed Severstal US Holdings II Inc., based in Dearborn, Mich., as its single-largest unsecured creditor, with a claim of $36.5 million. Other unsecured claims include $22.4 million by Mountain State Carbon LLC of Follansbee, West Va., and $15.7 million by Ballie Steel PLC of London, England.
RG Steel said it began having substantial liquidity problems last year as steel prices sank while raw-material prices remained at peak levels. Steelmakers have been hammered by both the debt crisis gripping Europe and the economic slowdown in China.
RG Steel also said it faced significant setbacks in restarting its Sparrows Point steel plant. 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 in March 2011.
Analyst Applebaum blamed much of RG Steel's troubles on "failed trade policy" that allowed high-cost imported steel to grow to a 30 percent share.