RG Steel goes to auction - UPDATE: PLANT SOLD
Wednesday, 08 August 2012 12:43


15 bidders compete to purchase mill (UPDATED BELOW)

by Nicole Rodman

    After being postponed by a week as RG Steel officials attempted to identify a lead bidder, the auction of the steel mill at Sparrows Point was set to occur last Tuesday.
    Despite the delay, no initial stalking horse bidder emerged, triggering an Aug. 7 auction at the New York law offices of Willkie, Farr & Gallagher.
    Approximately 15 bidders competed in the auction, the results of which were not made public by press time.
    Of the bidders, only two companies have signaled intentions to resume operations at the plant.    
    These companies have been identified as Brazil-based steelmaker CSN and North Carolina-based Nucor.
    CSN has expressed previous interest in acquiring the mill during past sales.
    The other bidders in the auction consisted mainly of demolition companies and equipment auctioneers.
    According to industry analysts, the absence of a stalking horse bidder in Tuesday’s auction is a blow to both RG and those hoping to see the Sparrows Point mill return to production.
    In addition, the lack of a lead bidder means that there will be no baseline price for the sale of RG assets. This could lead to the properties being sold at far below value.
    At stake at Tuesday’s auction were RG properties in Sparrows Point and Warren, Ohio, along with the jobs of thousands of workers at both sites.
    Objections to the sale continued to arise on Tuesday as the Maryland Department of the Environment (MDE) contested the sale of the Sparrows Point mill. MDE argued that the sale order does not acknowledge a 1997 consent decree which ruled that any owner of the site must continue to correct environmental issues on the property.
    Last week, the U.S. Department of Justice raised similar objections on behalf of the federal Environmental Protection Agency.
    Seen by observers as a potential sign of things to come, at last week’s auction of RG’s Ohio Valley assets, most of the steelmaker’s properties were sold far under market value.
    RG’s Mingo Junction, Ohio, unit was sold for $20 million to Frontier Industrial Corp., a New York demolition and recycling company; they plan to scrap the plant.
    This price is seen as a disappointment as the plant is equipped with a $100-million electric arc furnace just installed in 2005.
    RG’s Martins Ferry, Ohio, plant was sold to W. Quay Mull and Joseph N. Gompers for $2 million. Mull has already announced plans to keep the plant open.
    RG’s Ohio Coatings Co. and Yorkville, Ohio, plant were sold to Esmark Steel Group for approximately $6.65 million. Some production will continue at the Yorkville facility.
    Earlier, on July 20, RG Steel agreed to sell its Steubenville, Ohio, plant  to Wheeling, W.Va-based River Rail Development LLC. for $4.3 million.The new owner plans to sell the facility for scrap.
    Results of Tuesday’s auction were not made public as of press time.
    U.S. Bankruptcy Court Judge Kevin J. Carey will review and approve the sales on Aug. 15.

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UPDATE: Steel mill purchased by liquidation company 

    News outlets have reported, and The Eagle has independently confirmed, that the winning bidder for the steel mill at Sparrows Point was Michigan-based liquidation company Hilco Industrial.
    A report in The Baltimore Brew provided details on the sale, noting that Hilco placed the top bid at $72 million.
    No steelmaking companies bid on either the RG mill at Sparrows Point or the one in Warren, Ohio.
    In an e-mail to union members, United Steelworkers Local 9477 President Joe Rosel acknowledged that the auction “did not go as planned nor as we expected.”
    Rosel expressed uncertainty to his membership, explaining, “It is our understanding that the new company also will have to assume our contract under the Chapter 11 bankruptcy, but going forward we don’t know how that will play out in terms of severance or benefits.”
    The U.S. Bankruptcy Court in Wilmington, Del., has not yet released official confirmation of the sale.
    More information will be available in next week’s issue of The Eagle.