Feedback

New York hedge fund takes investment stake in Sparrows Point owner

steve feinberg

Stephen Feinberg is CEO of Cerberus Capital Management, which has taken an investment position in RG Steel.

Photo by: Wall Street Journal

Cerberus Capital Management, one of the country’s leading private equity investment firms, has tossed a lifeline to RG Steel, committing new capital to the cash-short owner of Sparrows Point.

After days of rumors about a mystery investor, RG Steel tonight confirmed that affiliates of Cerberus have “committed to provide RG Steel with significant new capital.” The release adds that Renco Group, RG Steel’s parent company, has also supplied more cash.

The amount of capital provided by Cerberus – or whether the hedge fund has taken a direct ownership position in RG Steel – was not disclosed.

Thanks to the cash infusion, RG Steel has restarted Sparrows Point, whose steelmaking operations were abruptly suspended on December 22 and more than 600 workers were thrown out of work.

Sources at the Baltimore County mill tell The Brew tonight that the company expects to be producing a commercial grade of steel by next week – and nearly all laid-off employees are expected to return to work.

Tonight’s announcement does not disclose whether a group of banks, led by Wells Fargo and GE Capital, have eased the terms of a $750 credit facility whose curtailment helped plunge the steel company into crisis last month.

However, V. John Goodwin, president and CEO of RG Steel, is quoted in tonight’s release as thanking “our bank group for their support.”

Three-Headed Dog From Hades

Cerberus was founded by Stephen A. Feinberg, 51, a reclusive financier who lives in Manhattan. The son of a steel salesman, Feinberg was raised in Spring Valley, N.Y. He still describes himself as “blue collar,” even though he is a Princeton graduate and takes home as much as $50 million a year.

Named for the mythical three-headed dog that guarded the gates of Hades, Cerberus specializes in “providing both financial resources and operational expertise to help transfer undervalued and underperforming companies into industry leaders,” according to its website.

Cerberus has stakes in many different kinds of companies, including grocery stores (Albertson’s), bus makers (Blue Bird), life insurance (Scottish Re), Hollywood movies (it owns Spyglass Entertainment, producer of Sea Biscuit, The Tourist and Get Him to the Greek), fast-food outlets, and banks.

It is known for investing in troubled industrial sectors. In 2007, the hedge fund purchased Chrysler Corp. from Germany’s Daimler Benz.

The investment turned sour, and the Feinberg group lost millions of dollar (though it later recouped much of the losses when it sold Chrysler Financial). Eventually Chrysler had to be bailed out by the federal government.

Tonight, Mark Neporent, chief operating officer of Cerberus Capital Management L.P., said the investment group was investing in RG Steel because it “is integral to one of America’s key strategic industries.”

Former vice president Dan Quayle is chairman of Cerberus' global investment unit. (Photo by Gage Skidmore)

Former vice president Dan Quayle is chairman of Cerberus' global investment unit. (Photo by Gage Skidmore)

The Dan Quayle Connection

Cerberus is also known as a repository for former high government officials and lobbyists. Dan Quayle, U.S. vice president under George H.W. Bush, has served as a Cerberus door-opener in Washington and abroad. He is currently chairman of Cerberus Global Investment.

Another government alumni is John W. Snow, who chairs Cerberus Capital Management. Snow was U.S. treasury secretary under President George W. Bush. Before that he headed CSX, the freight railway that serves the Sparrows Point mill.

Uncertain Future

While the cash infusion by Cerberus has allowed Sparrows Point to reopen, the mill’s long-term prospects are very unclear.

The steel industry is flooded with excess capacity and prices have remained stubbornly low compared to raw material costs (steel prices have been rising in recent weeks). Several production units at Sparrows Point are obsolete and its customer base has eroded.

Over the last six months, the mill has lost as much as $1 million a day, sources tell this website. Some of the losses were due to the company’s strategy of underselling  steel in order to increase orders.

In tonight’s release, CEO Goodwin put on a brave face.

“With this new capital in place and improving market conditions,” he said, “RG Steel is well positioned to service its customers now and in the future. . . We emerge from this challenging period a stronger company dedicated to producing products of exceptional quality and providing superior customer service.”

 

 

Be sure to check our full comment policy before leaving a comment.

  • Duane

    It took a conservative to bail us out!

  • Mrs Ronald Sczruba

    My comment is what are the intentions of the MINGO plant,its also a plant of RGSTEEL,and we have been left out in the cold.No where have we heard anything about our plant,we have workers who are waiting to hear something positive also,but all we hear is Sparrows point.The plant in Mingo was a smooth operating plant.At least when Severstahl owned us we were treated with respect,and cared for.Iam just a wife of one of these workers in Mingo and it upsets me because these men are good and faithful workers who gave concession after concession to keep the mill operating,We hear nothing from the union,I imagine when there is news we will get it over the TV.Just in case the new investors read this article were still alive and kicking here in STEUBENVILLE AND MINGO. DON’T FORGET US!

    • Youkidding

      severstal treated us with respect and cared for!where have you been they are the ones who bought us AND shut us down!

    • Warpig

      Seems to me you will get more information here then you will the union, sad but true i think. Here at SP i wonder where are sustainability coordinator is?  If he cant give us some info then the position created by the international is just what alot of people are saying about it. just a figure head position for doing nothing 

    • MTE-OHIO

      As a thirty plus year worker at Mingo, where do you get that we were treated with respect by Severstal? They SHUT us down and deferred the orders to Mississippi. They wouldn’t even negotiate a contract with us. They alone are the reason we were idled. About the only place you will hear anything is on here. The spineless officials at 1190 haven’t said one damn thing in many months. Members of 1190, we need to send these jellyfish packing in the spring. ALL OF THEM. Ask them how many paychecks they have missed. They get lost time allright, as they are truly lost.

  • Steveiez

    I do hope it works out. But…as the article says, there is too much production. Someone has got to; well you know.

    Putting money in Sparrows is like pouring down money into a rat hole.

    • Walter

      Steveiez – Sparrows Point has the advantage over the other mills in that if we run L-Furnace at close to 100% SP can upset this over-production to its advantage.  From what I am hearing, our new investors have put the word out that we are going to run full out with no hold’s barred.  These investors are the world’s smartest money minds and believe me they would not pump millions down a rat hole!   I think that we here in SP can all sleep soundly knowing that we are all part of Mr. Ira and Mr. Stephen’ s new family.

      I think that our fears of the global marketplace are over, as SP will soon be the one  pulling the punches and sweeping away the competition.  

      I also feel strongly that our Mingo and Steubenville brothers and sisters will soon join SP in taking RG Steel from number 4 to  to number 1 in market share. The larger we are the more power we will have to capture market share.

      Walter

      • Isitmyturn

        rg needs to get rid of you, you got the time to post all your bs! no way your doing any work. WAKE UP RG!

      • Warpig

        I also feel strongly that our Mingo and Steubenville brothers and
        sisters will soon join SP in taking RG Steel from number 4 to  to number
        1 in market share. The larger we are the more power we will have to
        capture market share ”

        Walter the above quote you made is one of the more hopeful and caring you have made in a long time. Lets hope that statement becomes true:)

  • Walter

    One more thought – since George is home with the flu, I will have the pleasure to report that at our Sparrows Point seaport tonight we have three giant bulk ships unloading mountains of raw materials.  WOW Mark- I told you we were going to hit the lottery!  We have the ships  ORNAK, the YARRWONGA, and the lovely NORD EMPEROR, and a few days ago we had to two other large bulkers!  Look out for the marketplace to be flooded with high quality SP Pig and Steel!!!!  I am as pleased as punch with the way things are going for us!

    Walter

    • Silvervette 96

      Walter,
      Although your comments are quite enjoyable to read, one part is incorrect – the Nord Emporer is not unloading steel mill material.

      • MTE-OHIO

        Walter thinks that every ship down there is full of materials for S.P. to instill fear in the hearts of global steel competition. The only thing full is Walter,full of shit.

      • Walter

        Silvervette 96 – Good work, I was right two out of three.  George goes on the ships, has coffee with the crew and finds out all the facts for us.  I have enough projects here in SP, let alone report on the ship movements. True, without the ships bringing in raw materials we are all doomed!

        Silvervette 96 – will you take over George’s Ship Report until he returns to work?  Also -what the heck was the giant Nord Emperor doing at out ore pier, if it was not bringing us raw materials to feed our Beast?  I know that the wonderful Kinder Morgan folks uses our docks and its good to have them use our space to bring more income to the company.   Thank you for your report and being interested our SP port shipping news.   

        Walter

  • Unellu

    Mark, thanks for your persistent reporting on this subject.   I don’t know if you saw this program on MPT–Judy Woodruff interviewed two folks with opposing points of view–one the CEO of an equity fund and another a writer who says that America is filled with the corpses of companies equity funds wanted to turn around but didn’t, because the funds cashed out their short term profits and bailed out on the long term health of the companies they grandiosely and purportedly wanted to rescue.  The investigative query, on the part of MPT, was about the activities of Bain capital, Mitt Romney’s equity fund that buried the carcasses of many such companies, when the fund itself made huge profits for its investors.  The equity fund game is a dangerous one.  These funds are the ones with ready cash and hence cash starved companies and their workers feel exhilarated, when fund CEOs arrive like white knights on horses to the rescue but equity funds owe first loyalty to investors.  It may seem that the interests of the equity funds with ready capital and the languishing companies with none would fuse and it may seem that turning these companies around is a win-win for both parties in a contractual agreement.  But not so fast, said the writer yesterday, on MPT, much to the consternation of the CEO of the equity fund–the CEO, in fact, muddled his way through the interview–the investors are looking for a quick response to quick infusion of cash and equity funds do not stick with manufacturers who have to find the raw materials, make their products, win against stifling competition and sell their products in the open market to survive.  They’ll stay for the ups but won’t for the downs.  Hence it is but a temporary victory, that Sparrows Point has found itself an investor.  I am not denigrating the triumph.  Something, indeed, is better for the suffering workers and some hope is better than none.  But it is pathetic that we have investors today, for whom the globe is a playground.  When it is easy to cash out, cut losses and move on to greener pastures, investors do so without qualms, because they want quick results.  They can get it somewhere else–investing in China’s bullet trains may do it, or in the pipeline that is supposedly being built by the UAE to by-pass the Strait of Hormuz.  Stephen Feinberg, of Cerberus Capital, has to show the board members of his fund, within the month, that his investment in Sparrows Point is paying off, or else, his neck will be in the noose.  Also note the beauty of the name Cerberus–remember the dog you have to pass to enter Pluto’s underworld?  Fierce was he, and cannibalistic–I don’t doubt the name is most apt for this fund.  Out of all the names in the world, Cerberus?  The irony of that not lost on me.         

  • Monty Burns

    A private equity fund and a hedge fund are not one and the same.

    • Anonymous

      From B Brew: True, but remember the three-headed dog. Cerberus Capital trades (hedge fund), invests (private equity), lends (bank ownership), parachutes its own executives to manage companies, etc. In the case of RG Steel, Cerberus is reportedly acting as an investor, whether passive or active only time will tell. -MR

  • ravenssuck

    ah yes.,, the gleaming coal barges lined up on the mighty ohio river waiting to be unloaded to feed our world class coke ovens.. 8 battery and the old block waiting to gobble up all the coal and make some of the finest coke in the world….i had a beer with the tug boat captain at the yaught club and he said more coal on the way,,,  ah yes,   mr ira is pouring money into mountain state carbon to make us all money in the future,, sorry about you boys in baltimore..maybe you can come to the coke plant and clean doors for a while so you can maybe retire WALTER AND GEORGE

  • ravenssuck

    ah yes.,, the gleaming coal barges lined up on the mighty ohio river waiting to be unloaded to feed our world class coke ovens.. 8 battery and the old block waiting to gobble up all the coal and make some of the finest coke in the world….i had a beer with the tug boat captain at the yaught club and he said more coal on the way,,,  ah yes,   mr ira is pouring money into mountain state carbon to make us all money in the future,, sorry about you boys in baltimore..maybe you can come to the coke plant and clean doors for a while so you can maybe retire WALTER AND GEORGE

    • You are a dummy too !

      Take that dumb and dumber ! We have our own ship spotters here on the mighty Ohio River ! You clowns cry like babies when you are laid off for a week or two. I’ll bet the suicide rate in Baltimore would increase tenfold if you had to spend 3 years on the street like we have here in the Ohio Valley !

    • Wci8757

      the only way you will see walter and george come down there is if there is someone that needs a good lapping.

  • 68HSvagabond

    What’s the feeling out in the Ohio area regarding the recent news on the contract at Timken ? Looks like they may build overseas now instead of at home….doesn’t seem like a good sign for the USW either.

  • Walter

    Imarkle, this looks very impressive to me too!  These fellows are tossing billions around and we only need a few million here and there to keep us out of the woods.   Cerberus can use their pocket change to keep us going, so for the time being the investors are not going to be so concerned that our steel mills could be a burden to them until we get up to full output.

    And do not forget that we still have Mr. Ira to guide us through any problems and to keep the Cerberus folks focused.   I always did like Dan Quayle, remember when he came to the Iron workers hall when he was running for office, I wish that he would run for office again.Walter

    • observer

      A few million????  You’re losing 30 million a month !!!!!    

  • Walter

    Wci,  I do not want to see the other companies go out of business when ALL of our RG mills are back running full tilt.  But, our RG family comes first and the competition did not give a hoot that our Ohio and SP mills were shutdown.  Iron Age said that if all of RG’s assets were up and running they could become a dominate player in the US and Global marketplace.

    The hard facts are that when our L-Furnace is running at 100% and our Ohio Valley  production is put back on line 100% – our competitors are going to fall by the wayside and most likely their plants will end up as scrap in one of our furnaces!   Did you ever watch the Animal Channel when the stronger and smarter animals eat the weaker and dumber animals?  Well Mr. Ira and his crew is going to eat the competition!  Just be thankful that we are all in with the smarter pack of wolves!

    Walter

    • Wci8757

      i just hope that you don’t believe you own b.s.

  • You are a dummy too !

    I don’t know why I am not surprised that you are smitten and enamored with a nit wit politician that couldn’t even spell potato ! Have you ever watched ” Are you smarter than a fifth grader ” ? In case you haven’t, Dan Quayle is not !

    • Walter

      I knew that you were going to bring up the Spelling Bea – its Patato!  Most big shots cannot spell, that is why we have dicktaphones and pretty Girl Fridays at our Sparrows Point World Headquarters.

      Yes, we get upset anytime someone tries to cool down the Beast of the East.  George and several of the other guys almost had a nervous breakdown over this last episode.  3 years and I agree with you that we SP boys would most likely jump off of the ore pier into the mighty Patcrapsco River!   Hopefully this is the end of it for us in 21219 and for you guys out West and everyone will go back to full employment just the the old days.

      Walter

  • Sczruba carol

    The comment I made about being treated with respect was used because they kept our insurance going for two years and also paid sub pay,as  I understand it RG is paying insurance but it will come out of  any severence pay if you leave employment if Iam wrong Iam sorry,just chalk it up to a women that doesn’t know what she is talking about,I admit I didn’t know that orders were sent to a ,Missippi plant,but we can thank all those good boys in Washington for that,American workers mean nothing compared to the almighty dollar,I was told the other day that they are rebuilding the golden gate bridge,its supposed to be a huge project,calling for an enormus amount of steel.Our American companies bid on it and yes you guessed it,China was given the contract and they will use our iron workers{only because they couldn;t bring there own},and I can’t believe they would use China steel because it is inferior to ours.This is why until things are changed with the laws American workers are in aheep of trouble.I pray that this infusion of money and the hard work will bring about something good for all our plants,but like I said before,just don’t let them forget about us down here in Mingo,also we need to get our UNION going or before long we will all be working in non UNION plants.  Mrs C. Sczruba

  • Walter

    30 million a month!  That is impossible Observer, just look at Mr. Feinberg in  the picture -does he look like a man that would be so foolish as to join in  and bankroll a company losing that much money?  

    • Walter is a dummy too !

      Yes Walter. He does and he is. He is also one ugly ass, sumbitch. Good think he is filtyh rich, he would definitely need to buy a wife.

    • Walter is a dummy too !

      Yes Walter. He does and he is. He is also one ugly ass, sumbitch. Good think he is filtyh rich, he would definitely need to buy a wife.

    • BITTER

      Yes

    • observer

      Impossible? I only quoted what the brew stated in one of their articles… As for the pic, He looks like a ‘vulture capitalist’ to me. It is the new American way; swoop in and grab every thing you can the hell with the American middle class!!!!      Good luck and work safely guys!!!

    • Wci8757

      he bankrolled chrysler.

  • balls slapping leo gerard

    meeting in mingo wed  wonder if they restart mingo ???????????? wait  we have a better chance in sparrows making a 30 million proift  this month    

  • TACO

    How come the Wall Street investors are buying trash art at record prices but cannot find a few million dollars to save several large steel mills from Baltimore to Ohio? Why did all these mills only get a little over $100 million from Wall Street when one investor just dished out $190 MILLION dollars for a ugly pencil drawing on CARDBOARD of a man SCREAMING that any 5 year old kindergarten child could do better. The a few days later another Wall Street investor shells out over $120 MILLION for a canvas splattered with paint drips!
    No wonder Wall Street is broke when it comes investing in the very steel mills that could make them more money and support thousands of steelworkers and their families.  Maybe we should all take art lessons so that we can feed our families and keep our communities alive?

  • Walter

    I am shocked to see that in this downturn our Wall Street investors are “investing”  hundreds of millions of dollars on artwork that no steelworker in his right mind would allow to hang in the mill’s washroom!

    Where is Mr. Feinberg?  Why is he not stepping up to the plate again to help us over this hurtle?  We only need a small infusion of cash which is just pocket change for our investors to save all of these icons of American industrial might!

     I still believe in Mr. Neporent as quoted in this older Brew article -

    “”Mark Neporent, chief operating officer of Cerberus Capital Management L.P., said the investment group was investing in RG Steel because it “is integral to one of America’s key strategic industries.” ”"

    I agree with Mr. Neporent that Steel making at Sparrows Point is STRATEGIC to our national defense, so you will likely see movement by our elected officials to step in to keep iron making at the Point viable at any costs or means.  Things are going to start moving fast – either the investors putting their money up or a government bailout of some sort, or both.   Anyway you look at it, SP is too important to too many entities to let go idle for even a few hours.  I feel very confident that the White Knights will arrive before the clock strikes 12!

    Dr. Walter Phd. BS

  • George

    AHOY SP Shipmates- Had a Memorial Day cookout with one our salty Chesapeake Bay Pilots.  He said that a ship from Brazil is going to be in the neighborhood of 21219.  Now Dr. Boothe, what was the name of the company from Brazil who wanted SP real bad?  Looks like the SP Ship Watcher’s Club is going to be in for a busy time come summer.  Looks like the SP Ship Watcher’s Club knows more than those Wall Street analysts and I like that!  I think that some of that high priced art would look good in our ore pier TiKi Bar!

    Capt. Georgie & Crew

  • klg1956

    Soros and his company needs a huge write off….he’ll promise to hire some people to make it look like we are back onto the road of recovery and then after the election, everybody will be laid off if they are hired yet…..and the company will be sold off for parts…..and it will be a write off to Soros who lost hundreds of millions in investments this year……he needs a huge write off and it looks like this is it…and there is a connection to Soros and all the gun companies and ammunition making cos being bought up by his company.  Soros is anti gun except his house…he is anti capitalism, except for his capitalism and he is anti America, no wonder why he backed Barack Hussein Obama!

    • Envcontractor

      This has nothing to do with Soros. Soros has nothing to do with Cerebus.  Actually, Soros made a lot of money this years

More of the Daily Drip »

Below the Fold

  • March 24, 2014

    • Last Thursday, I sent an email to the Mayor’s Office of Communications asking for some basic responsiveness: Please return our emailed queries and phone calls about stories. Please send us the same routine emails you send to other members of the media. Lately, more so than usual, they haven’t been. It’s a shame because, even [...]

Twitter

Facebook