The speedy bankruptcy auction planned for the Sparrows Point steel mill and other assets held by its cash-strapped owner has come under fire from unsecured creditors, who say the timeline is so short that it reduces the possibility of a buyer paying fair value and restarting the facilities now standing idle.
RG Steel LLC, which owns the Baltimore County mill, filed for bankruptcy protection at the end of May. It is in the midst of laying off nearly 2,000 employees at Sparrows Point — almost the entire workforce — as it shuts down division after division.
The terms of its bankruptcy financing call for assets to be sold quickly, with bids due by July 9, an auction July 12 and sale by July 27, according to the official committee of unsecured creditors' objection, which was filed Monday.
The unsecured creditors called this "a fire sale that will almost certainly yield fire sale results." RG Steel won't be able to properly market its properties, and companies will be discouraged from participating because they won't have enough time for due diligence and putting together bids, the committee said in its filing.
Auctions held so quickly after the bankruptcy process begins "are very rare," said Geoffrey Frankel, a managing director at Huron Consulting Group, in a declaration included with the committee's filing.
"The sale timeline contemplated under the Bidding Procedures is woefully inadequate, especially given the size and complexity of the assets and the absence of a stalking horse bidder," Frankel wrote.
Attorneys for RG Steel did not respond to requests for comment.
The unsecured creditors' committee said the timing seems to benefit RG Steel's majority owner, the Renco Group. Under the terms of the bankruptcy financing for RG Steel, secured creditors — including Renco — get a leg up on other bidders by not being required to provide audited financial statements and cash deposits, the committee said.
The committee questioned the need for bankruptcy financing at all, saying it doesn't actually provide net new cash to RG Steel but does require the company to pay about $300 million of pre-bankruptcy debt to its senior lenders.
The United Steelworkers Local 9477, which represents most workers at Sparrows Point, has expressed confidence that a buyer could be found for the mill. Potential bidders toured the facility last week, the union president said Friday.
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