Pension Agency Raises Red Flag In RG Steel Bankruptcy
Concerned that workers at a failing steel company might be cheated of their pensions, a federal agency intervened last week to insure that the company's owners don't misuse the bankruptcy courts to let themselves off the hook for some $70 million owed to employees.
The federal agency—the Pension Benefit Guaranty Corporation or PBGC—filed an objection in bankruptcy court June 14 to a temporary financing plan that would shield Renco Group Inc. from the pension liabilities of its subsidiary RG Steel LLC, the official owner of three troubled steel mills. RG Steel filed for bankruptcy May 31, and has since begun laying off some 4,000 workers at mills in Maryland, West Virginia and Ohio.
RG Steel and Renco are both controlled by billionaire Ira Rennert, who engineered a deal last year to buy the mills from the previous owner. Rennert, sometimes called a “vulture capitalist,” has announced his intention to sell the three plants to any buyer, or buyers, than can be found.
A red flag was raised for PBGC in the initial bankruptcy filing, according to court documents, because the details of a temporary refinancing plan would release Renco from any liability to the underfunded pension plans for employees at the mills in Wheeling, W. Va., and Warren, Ohio. According to the PBGC lawyers, any such releases are evidence of “a significant overreach by Renco, are both over broad and premature, and should be denied” by the bankruptcy judge.