Working In These Times
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.
The PBGC court filing charges that Renco, and Ira Rennert by implication, are trying to evade legal responsibility for the pension money owed to about 1,381 workers at the Wheeling and Warren plants (a third plant at Sparrows Point, Md., is not included in this dispute). Agency spokesman Marc Hopkins specifically stated that "PBGC intends to pursue claims against Renco" and affiliated companies for outstanding pension liabilities.
PBGC also stated that Renco appears to be guilty of bad faith in dealing with the pension agency. According to the court filing, "In a transaction that took place in January 2012, Renco, contrary to express representations it made to PBGC, transferred 24.5 percent of its equity interest in RG Steel to affiliate or affiliates of Cerberus Capital Management LP. The transaction caused Renco's equity stake in RG Steel to fall below 80 percent … potentially releasing Renco from its financial obligations to the pension plans. PBGC believes the transfer of the equity interest to Cerberus was undertaken by Renco to evade pension liability claims … ."
Judge Kevin J. Carey of the federal bankruptcy court in Delaware is scheduled to make a ruling June 21 on whether the temporary financing plan can go forward.
United Steelworkers spokesman Tony Montana said the union, which represent some 3,500 employees at all three RG Steel mills, would have no comment on the PBGC action. Earlier, the union had indicated that agreements to cooperate with RG Steel in finding a new buyer for the plants prevented it from making detailed comments about the company's business dealings.
Less reticent was Ohio Sen. Sherrod Brown, a Democrat. A statement from his office seemed to assume that the steel mills would never re-open:
Thousands of workers in Ohio are now out of work as a result of RG Steel's decision to file for bankruptcy. Many of these workers are qualified for job retraining assistance and a health insurance tax credit that ensures they can continue to afford coverage … It's vital that these workers get the federal assistance that they have earned and are now entitled to, which is why I am asking the Department of Labor and Internal Revenue Service to work with these employees, their unions and the State of Ohio to ensure that they are provided with the proper assistance.
The bankruptcy is not only closing the mill in Warren, Brown noted, but is also causing unemployment at smaller facilities in the Ohio communities of Yorkville, Mingo Junction and Martin's Ferry. The Wheeling mill in West Virginia is also right on the Ohio border, so some workers there are also Ohio residents.
Advised that the PBGC court action would have a particularly strong impact on Ohio steelworkers, Brown told Working In These Times that "through not fault of their own, hundreds of workers at RG Steel's facilities in Ohio will be left without a job. … Regardless of what happens with RG Steel's bankruptcy, the company must make every best effort to ensure that the workers' pensions and benefits remain whole."