RG Steel gets OK of global settlement, dismissal of Chapter 11 cases

By Mark Reccek

Bethlehem, Pa., Oct. 15 – RG Steel LLC received court approval of a global settlement agreement which will lead to the dismissal of the company’s Chapter 11 cases, according to an order issued Thursday with the U.S. Bankruptcy Court for the District of Delaware.

Under the settlement:

• The Cerberus pre-bankruptcy secured parties and Renco Group, Inc. agree to allow RG Steel to use $14 million of cash collateral to fund a distribution pool.

An additional $7.8 million of cash collateral will be used to pay budgeted expenses and the company can use any funds in a non-professional fee carve-out account to make distributions on account of administrative expense claims and to fund post-bankruptcy operating expenses;

• Westchester Fire Insurance Co. agrees to contribute $3.4 million to the estate;

• RG Steel will cause $15.6 million to be deposited into a segregated account for the distribution pool; and

• A total of $600,000 of the distribution pool will be allocated to holders of administrative expense claims, $3 million to holders of other claims and $12 million on account of United Steel, Paper and Forestry, Rubber Manufacturing, Energy, Allied Industries and Service Workers Union, AFL-CIO-CLC parties’ claims.

According to a Thursday press release, the court granted USW Local 9477 entities roughly 70% of the $17.4 million total to be distributed to creditors.

USW’s share of the settlement comes to about $12 million, a sum that includes about $6.3 million in vacation and severance payments owed to about 4,000 workers at former RG Steel mills in Sparrows Point, Md., Warren, Ohio and Wheeling, W.Va., and at a coke-making facility in Follansbee, W.Va., the release said.

The release also said the settlement includes payments of $2.4 million to a voluntary employee beneficiary association (VEBA) for workers at the Warren mill; $990,790 to the Steelworkers Health & Welfare Fund to cover more than $6 million in claims; more than $814,000 to the Steelworkers Pension Trust; $445,590.31 to a VEBA for workers at Wheeling-Pitt, a predecessor to RG Steel; $480,000 to cover unpaid medical claims; and about $54,000 in severance for workers at an Allenport, Pa. mill, which closed in 2008.

The order also laid out the dismissal conditions, including distribution or release of all the funds in the distribution pool, entry of a court order, conclusion of all avoidance actions and payment of any then accrued and unpaid fees.

As previously reported, the company said the committee filed or sought standing to file some actions against the secured parties and managers for the benefit of unsecured creditors, but the ensuing litigation was expected to be lengthy and uncertain. In addition, RG Steel said there was no source of funding for such litigation.

“Given the debtors’ dwindling assets and the lack of continuing operations, the unlikelihood that further litigation could bring funds into the estates in the near term (if at all), and the debtors’ inability to fund a plan of reorganization, the parties realized that absent resolution on a global basis of the committee’s claims, the debtors’ efforts to exit these cases would be unavailing,” a previous motion said.

“If the settlement agreement is not approved and implemented, it is almost certain that creditors other than the pre-petition secured parties will receive no recovery at all.”

RG Steel, a Sparrows Point, Md.-based flat-rolled steel processor, filed for bankruptcy on May 31, 2012. Its Chapter 11 case number is 12-11661.

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