Daily News: June 1, 2012

RG Steel Files for Chapter 11, Seeks DIP Loan From WFCF


Steel producer RG Steel, LLC and its wholly owned subsidiaries announced that they have filed petitions under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware. RG Steel was formed in March, 2011 following the purchase of three steel facilities located in Sparrows Point, MD. Wheeling, WV and Warren, OH. The company listed over $1 billion in both assets and debt.

According to court documents, RG Steel is seeking court approval to obtain post-petition loans, advances and other financial accommodations from Wells Fargo Capital Finance as administrative agent of the company’s existing credit agreement.

The debtor-in-possession loan includes incremental post-petition borrowing capacity of up to $50 million in revolving supplemental loans and the removal of about $21 million of reserves previously imposed on the company under its existing credit facility.

Under RG Steel’s existing credit agreement, which consisted of a $625 million revolving loan A and a $25 million revolving loan b, as well as an $80 million letter of credit sub-facility, WFCF was administrative agent and co-collateral agent, GE Capital was syndication agent and co-collateral agent, UBS Securities and Bank of America were co-documentation agents, WFCF, GE Capital markets, Merrill Lynch and UBS Securities were joint lead arrangers and joint bookrunners and Abelco Finance was agent for the revolving loan B lenders.

John Goodwin, CEO of RG Steel commented “Despite the company’s aggressive cost reduction efforts, significant improvements in its cost structure, and substantial investment capital, the company has been unable to overcome the impact of the continued deterioration of the market and the inability of the industry to sustain a meaningful recovery.”

After a thorough analysis of the company’s liquidity position and extensive consideration of available alternatives, the company after consultation with its advisors, concluded that a voluntary Chapter 11 filing provided the most prudent and effective means of maximizing the value of our core business. “By voluntarily filing for Chapter 11, we will have the opportunity to use the court-supervised process to implement an orderly asset preservation plan and explore other options, including soliciting offers to purchase all or certain of the company’s assets. We have already begun a sales process aimed at maximizing value for all stakeholders and preserving the jobs created when RG Steel acquired these facilities” Goodwin stated.

In conjunction with the filing, the company has filed a number of first-day motions that will allow it to transition into a bankruptcy process in an orderly manner. Those motions include requests to make wage and salary payments and continue other employee-related programs.

The company has retained Willkie Farr & Gallagher LLP as its legal advisor, Conway MacKenzie, Inc. as its financial advisor and The Seaport Group as its lead investment banker.

Previously on abfjournal.com:

GE ‘Optimistic’ on Reaching Solution With Maryland Steel Mill, Friday, January 06, 2012

GE Capital Co-Agents $750 Million Credit Facility for RG Steel, Monday, April 04, 2011