The owner of the struggling Sparrows Point steel mill faces a tight deadline — late July — to sell the plant and other assets under the terms of an interim loan for up to $50 million that a U.S. Bankruptcy Court judge approved Friday.
The mill's owner, RG Steel LLC, filed for Chapter 11 protection from creditors Thursday, just days before it plans to idle operations at plants in three states and lay off thousands of workers, including nearly 2,000 in Sparrows Point, starting Monday.
The steelmaker, which said it owes more than $1 billion and had run out of cash, is seeking a buyer for Sparrows Point and its two steel plants in Wheeling, W.Va., and Warren, Ohio, as well as other steel-related operations.
On Friday, a Pittsburgh company emerged as a bidder for a small portion of RG's assets outside Maryland. A spokesman for Esmark Steel Group, a subsidiary of Esmark Inc., said the company had submitted an offer to acquire most assets of Wheeling Corrugating Co. The spokesman, Bill Keegan, said the company has not considered purchasing or investing in any of the operations at the Sparrows Point mill
"We have no intention to be in the mill business," Keegan said
Esmark specializes in flat-rolled steel and makes parts for the automotive, construction and building products industries, but does not produce steel.
"We have been working closely with the steelworkers in West Virginia to preserve and protect ... union and nonunion jobs in West Virginia and across the country," Keegan said.
During RG Steel's first appearance in bankruptcy court in Wilmington, Del., on Friday,
approved a request to borrow up to $50 million from Wells Fargo Capital Finance and
and to tap into $21 million in cash reserves set aside to pay back debts.
The company, which has $1 billion in assets, had said in court documents that without the financing, it would be forced to "wind down the remaining operations through a value-depleting fire sale."
An attorney for RG Steel, Shaunna D. Jones, told the judge Friday that "the lenders have agreed to provide a lifeline however short" so RG Steel "can pursue a sale," according to a Bloomberg News report. "Conversations have been happening with potential purchasers."
The credit agreement sets milestones and deadlines for selling company assets, including laying out the procedures for bidding by June 19 and selecting and submitting the winning bids by July 17. Any sale must be closed July 27.
If a sales agreement is reached that is satisfactory to lenders, they would have the option of extending the loan maturity date and a closing date to Aug. 14, according to terms listed in the company's motion seeking the emergency loan.
Officials of the United Steelworkers of America told union workers in a statement that they hope RG Steel can find a buyer within the next 60 days, according to the Associated Press.
Joe Rosel, the recently elected president of Steelworkers Local 9477, which represents hourly workers at Sparrows Point, did not return calls seeking comment.
The credit agreement also requires RG Steel to "use their best efforts to consummate a sale of all of nearly all of the Wheeling Corrugated division by July 27," which likely reflects the bid by Esmark.
Esmark made its bid for the corrugated division, which it had owned previously and which includes eight finishing facilities and service center operations, about a week and a half ago, Keegan said. Esmark had been in negotiations with RG Steel for some time and hopes to close on the asset purchase within 45 days, he added.
That sale, not yet finalized, would require the approval of the bankruptcy court and the steelworkers union. That division employs about 220 workers, Keegan said.
"If we're successful, these additional assets will help us expand our operations into steel products used in construction, agriculture and bridge building," he said.