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Fate of economic powerhouse Sparrows Point should become clearer this week

A "stalking horse" bidder needs to be identified or the steel mill goes up for auction.

Even down on its knees, the Sparrows Point steel mill was an economic powerhouse for the Baltimore region.

The sprawling mill on the southeast edge of Baltimore harbor produced $1,492,098,714 in sales in the 12 months prior to its bankruptcy filing on May 31, court records show.

In addition to a direct payroll of 2,000 employees, hundreds of other jobs and tens of millions of local business revenues depended on the mill.

These ranged from stevedores employed by Kinder Morgan on the docks, handling bulk shipments of iron ore and coke from ocean carriers, to specialized repairers of electric motors in Baltimore to suppliers of hydrogen, oxygen and chemicals for various steelmaking processes.

As early as today, the fate of the mill (and its sister plant in Warren, Ohio) may come into closer focus as the deadline for a lead or “stalking horse” bidder approaches.

Under a last-minute deal last week, RG Steel management was granted an extra week by the U.S. Bankruptcy Court in Wilmington to identify a stalking horse.

Such a bidder would set a minimum price for the properties and kick off a two-week period to negotiate a sale before an August 23 auction.

Company's fate still up in the air.

Bankrupt company’s fate still up in the air.

If a stalking horse is not identified, Sparrows Point, Warren or both mills are set to go on the auction block tomorrow at the law offices of Willkie Farr & Gallagher in Manhattan.

Operator or Demo Contractor?

The key to the steel mills’ futures is whether the stalking horse bid or bids come from a legitimate manufacturing company or a demolition contractor.

About 18 groups reportedly filed the paperwork and put up a 2% cash deposit to bid on RG Steel’s properties.

The Brew reported, however, that only three groups appear as operators who would reopen all or part of Sparrows Point or Warren as going concerns. The rest are demolition companies and scrap dealers that would sell off the properties.

In a very fluid situation, the three groups identified as potential bidders were Brazilian steelmaker CSN; Optima Fund Management, a hedge fund associated with Ukraine’s Metinvest metals group; and domestic producer Nucor Corp.

There are also reports that Ira Rennert, owner of RG Steel, is contemplating bidding on the Warren mill as a credit buyer, using his financial stake in the company as collateral for a purchase.

Questionable Assets

In papers filed with the bankruptcy court, the RG Steel group reports secured claims of $784 million, split between a bank consortium led by Wells Fargo Capital and General Electric, Cerberus Capital Management and Rennert’s Renco Group. There is an additional $100 million claim by Severstal North America disputed by Renco that’s now in the courts.

The company claims assets of $1.29 billion and liabilities of $1.05 billion.

However, most of the assets are the book value of machinery and furnaces now standing idle and may not fetch the price underlining the company’s claim.

Last week, RG Steel’s facilities in the Ohio Valley were auctioned off at fire-sale prices.

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  • appalledinohio

    I’m not at all suprized by this article. Ira always wanted the warren mill if you ask me. I figure if he does take warren he’ll leave it down for a yr. or so to get the old guys to retire and possibly start up after he swings a deal aimed at concessions.
    Just my opinion. Good luck to s.p. and rhe rest of the plants.

    • GeorgeTheAnimalSteel

      I agree with you. Before the last sell the union wanted to group all three of these plants together as a bundle. Lots more were simply interested in the Warren plant alone. The union fought to keep this from happening back then but … Ira just unbundled them. It’s going to be very interesting. VERY.

      If Nucor buys it…how would they use it? They are mini-mill right?

      My wish would be if USS found some way to buy it. Most of the operations would be an upgrade to some (not all) of their mills in the Mon Valley.

  • Steelwife

    Tick tock…and we all wait…by some miracle I hope we can stay in the workforce…

  • Fordtrkfan

    The supsense is killing me! Is it time to make a job change, or is time to buckle down and get back to work? Sitting around waiting is making me grey!

  • Pointworker

    Think I have an ulcer. Let’s all hope and pray for a positive outcome tomorrow.

  • diamond dave

    LEAD BIDDER  FRONTIER INDUSTRIAL   CONGRATS   SPARROWS POINT

    • Pointworker

      How in the hell could you possibly know who the lead bidder is or are you just trying to only cause pain?

  • Dr. Raymond Boothe

    This entire auction is illegal and a higher Federal Court needs to intervene. I know that the men and union members in the valley are looking for a cease and dissist order. The prices for the Ohio Valley Plants were way underbid and should have never been approved. And the order of the bids are also up to suspect. Why were Warren and SP given extra time to find another bidder. That in itself is illegial. They should have had their bids in on the very same day as the Wheeling plants. This is a damn setup.

    There are also rumors about Goodwin, McCall and Rennet are setting up the valley plants to benefit Sparrows Point and Warren. Most agree that if Frontier moves to dismantle the EAF and send it  to Warren or Sparrows Point then a major conflict of interest will be pursued.

    Also people who are running down Mingos EAF process on the Brew are pursuaded to do so by Goodwin, McCall and Rennert. They want it sold and moved to somewhere else so Frontier we get a large amount of cash and Warren or the Point will have a new start thanks to Mingo.

    Wheeling Corrugating was allowed to be raped by Nucor. It was , very underbid for a company that has had an excellent sales base for 110 years.

    Some of this will not stand, and I am afraid that this process will cause somebody to get physically hurt. Many of these steel workers will not go “into that good night.” Already many bad rumors are already in the valley.

    I hope the judge will stop this entire mess and re-exame everything.This will not go away by tomorrow or ten tomorrows.

  • SteelDude

    Dr Boothe,

    I hear you about the low bids, but nobody else stepped up with any sort of “reasonable” bid.  These auctions are like the guy who puts his 2011 Rolls Royce up on eBay without setting a reserve, and the only bidder was some schmuck who bids $300 and gets the car.

    There was no serious interest in the Ohio Valley facilities.  I don’t like saying that, but that’s the case.  Otherwise some operator woulda stepped up and offered $30MM for Mingo.

    Given the union’s intransigence towards potential owners in the past, I suspect that some potential bidders simply said “screw them, I have better things to do than waste my time on this”.  CSN and Essar being two examples of white knights who were treated like trash by the USWA.

    • RRS

      Good point SteelDude, there are “white knights” out there,  and I would hope they would get a good reception from the USWA, if what you say is true, I would hope the USWA reconsiders their position and get the place going again, I look very much forward to the day when ( and I hope it,s when not if) I get the phone call to come back

  • Iamironman1998

    Good luck to all in these plants. Hopefully someone will purchase them and run them but the outlook doesn’t look good when only 3 are manufacturing companies. Why can’t Severstal buy the other 50% of MSC and own it outright?

  • steelwife

    Best of luck to all of us waiting…

  • Finicky

    Good luck to you too, could be  a life changer!!

  • RRS

    I,m hoping here, this may be a “pipe dream” but if a decent company, who ever it is, has the point and the workers best interests at heart and can show it in a contract, then I would hope that it,s agreed upon, I may be dreamin but I still believe there are companies out there who really wish to see the place through and want it to succeed, if that is so I would hope the USW would accede the purchase, I understand this is a sticking point, but I really hope for  the best in this situation. As I said before, I really do look forward to the call to come back and I,m sure others here feel the same way

    • bugsbunny

      you people voted for the last one, you would vote for anything, union yea right.

  • RRS

    Walter, I cetainly hope you,re right, I look forward to the day when I get called back to work at the Point, I think you would agree it,a an excellent place to work…RRS

  • Brownsrock2003

    just heard auction hasnt took place yet and delayed till later tonight hopefully?  at 245 pm

    • JohnDrSmith

      From who?

      • Brownsrock2003

         1375 union hall

  • newsflash

    just in, the international had 1190 people there to try and save s p and thats it.

  • Brownsrock2003

    1375 union meetin 730 tonight hopefully some news

  • Brownsrock2003

    was only inquiring bout auction of warren mill when i called down there sparrows auction could be happening or done, just to clarify

  • 9477 is that a combo meal

    Where is my Beloved Union at ?

  • Glad to be gone

    I can’t believe (well yes I can) that the following banks/whatever fell for the crap they were feeding them and gave them money. This show you how stupid banks really are.
    Wells Fargo Capital and General Electric, Cerberus Capital Management 
    write it off big boys!

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