RG Steel files bankruptcy to evaluate asset sale and other options

By Caroline Salls

Pittsburgh, May 31 - RG Steel, LLC and its wholly owned subsidiaries filed Chapter 11 bankruptcy Thursday in the U.S. Bankruptcy Court for the District of Delaware.

"Despite the company's aggressive cost-reduction efforts, significant improvements in its cost structure and substantial investment capital, the company has been unable to overcome the impact of the continued deterioration of the market and the inability of the industry to sustain a meaningful recovery," chief executive officer John Godwin said in a company news release.

"By voluntarily filing for Chapter 11, we will have the opportunity to use the court-supervised process to implement an orderly asset preservation plan and explore other options, including soliciting offers to purchase all or certain of the company's assets.

"We have already begun a sales process aimed at maximizing value for all stakeholders and preserving the jobs created when RG Steel acquired these facilities."

Any joint venture in which the company has an interest will continue to conduct business as usual and will not be subject to the bankruptcy case, the release said.

DIP financing

In conjunction with the bankruptcy filing, RG Steel has obtained a commitment for up to $50 million of debtor-in-possession financing.

The company said the facility also removes reserves previously imposed on its existing credit facility. In addition to the $50 million of supplemental loans, the facility includes up to $450 million of revolving A loans under the existing facility and $25 million of revolving B loans from the existing facility.

Wells Fargo is the administrative agent.

The company is seeking interim access to $30 million of the supplemental loans.

The DIP loan is scheduled to mature on July 27, subject to an extension to Aug. 14.

Interest on supplemental loans and revolving A loans will be Base rate plus 250 basis points. Interest on revolving B loans will be 13%.

Debt details

According to court documents, RG Steel has more than $1 billion in both assets and debt.

The company's largest unsecured creditors include the following:

• Severstal U.S. Holdings II, Inc. of Dearborn, Mich., with a $36.54 million seller note/trade debt claim;

• Mountain State Carbon LLC of Follansbee, W.Va., with a $22.41 million trade debt claim;

• Balli Steel plc of London, with a $15.77 million trade debt claim;

• Cleveland Cliffs of Cleveland, with a $10.86 million trade debt claim;

• Tube City IMS LLC of Horsham, Pa., with a $10.02 million trade debt claim;

• Phoenix Services, LLC of Unionville, Pa., with a $9.74 million trade debt claim;

• Baltimore County, with a $4.51 million trade debt claim;

• Steelworkers Health and Welfare Fund of Johnstown, Pa., with a $4.33 million trade debt claim;

• Ohio Department of Taxation, with a $3.9 million trade debt claim; and

• Norfolk Southern, based in Roanoke, Va., with a $3.28 million trade debt claim.

The company has retained Willkie Farr & Gallagher LLP as its legal adviser and Conway MacKenzie, Inc. as its financial adviser.

RG Steel is a Sparrows Point, Md., flat-rolled steel processor. The Chapter 11 case number is 12-11661.

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