A liquidation firm won the bidding for Sparrows Point, offering $72 million for the
steel mill — less than a tenth of what the complex sold for just four years earlier — and realizing the worst fears of its roughly 2,000 employees.
Mill advocates vowed to push for a miracle to keep steelmaking going there. The local United Steelworkers union had hoped for a steelmaker would buy and restart the mill — idled after owner RG Steel filed for bankruptcy in May. But no steelmaking companies showed up to bid at the Tuesday afternoon auction in New York, said Joe Rosel, president of Local 9477 in
The mill's general manager, Glenn Mikaloff, sent an email to managers late Tuesday that identified Hilco as the winner and the size of its bid.
"They pledged not to destroy key steelmaking assets for 6 months while the unsecured creditors attempt to find an operator," he wrote. "Sorry I don't have better news."
Hilco Trading LLC, based in Illinois, dismantles closed industrial sites, sells off retail inventory and recently auctioned off equipment from bankrupt solar panel firm
. Hilco declined to comment beyond saying that it did bid at the auction.
RG Steel did not return calls and didn't file auction results with the U.S. Bankruptcy Court on Wednesday. Any sale of the mill must be approved by the court, which has scheduled a hearing for Aug. 15.
The results were a tremendous blow for the steelworkers and hundreds of others in the region whose jobs depended on the mill, where steel has been made since 1889. Both the union and Baltimore County Executive
said they would work to find a company interested in purchasing Sparrows Point — or critical pieces of it — from Hilco to make steel there.
"Our position is that this is not over yet," Kamenetz said. "My understanding is that the other bidders had wanted an extension, and that was denied."
Ukrainian mining and metallurgy company Metinvest Group had reportedly registered to take part in the auction, but spokesman Ivan Shmidik said by email Tuesday that the company would not bid. U.S. steelmaker
and Brazilian steel giant CSN had also registered, according to a source. Neither responded to requests for comment Wednesday.
The $72 million sales price is "ridiculous," said Michael Locker, a steel industry consultant with New York-based Locker Associates. OAO Severstal paid $810 million for Sparrows Point four years ago. RG Steel bought the mill and other plants from Severstal just last year.
"This is a viable steel mill that's being sold off for a song," Locker said. "I don't know why the steel companies didn't show up — it's perplexing."
Many steel mills in the country aren't operating anywhere close to full capacity, and RG Steel blamed market deterioration for its rapid descent. But Locker doesn't think the market is so weak that steelmakers wouldn't want a big mill for a liquidation price.
He said the "super accelerated" nature of this bankruptcy case — RG Steel filed for Chapter 11 protection 10 weeks ago — could have left potential operators with too little time to do their due diligence.
"Why the judge and the creditors wanted to move so fast is beyond me," Locker said. "I think it interfered with finding a buyer."
John Anton, a steel analyst at IHS Global Insight, said he couldn't guess at the likelihood of the union and local officials succeeding in finding an operator.
"I will bet however that if anyone does come in they will only operate cherry picked lines, and that the odds of everyone keeping their job is zero," he said by email Wednesday.
intervened when the cash-crunched mill furloughed hundreds of workers in December, asking
— a key RG Steel lender — to help stabilize the company's "financial arrangements." The mill reopened in January after receiving more capital from RG Steel's owner, the Renco Group, and private equity firm Cerberus Capital Management.
Raquel Guillory, a spokeswoman for the governor, said Wednesday that O'Malley intends to help if the mill could still be sold to an operator.
"The governor would be willing to hop on a plane and meet with that company if it means finding a buyer that will keep these jobs here in Maryland," she said.
Sparrows Point was one of Baltimore County's largest employers before the mass layoff, but it was far leaner in recent years than it was at its height under
. Together, the company's mill and shipbuilding complex in Sparrows Point employed about 30,000 people during
, producing hundreds of ships.
Bethlehem Steel filed for bankruptcy protection in 2001. Sparrows Point has had four owners since then.
"We've been making steel here for 120 years, and we're not giving up," said Rosel, the local union leader and the third generation of his family to work at Sparrows Point. "We're still going to fight to find an operator for this plant, even in the face of what just occurred. There is an opportunity to make money for Hilco or somebody else by selling it to a strategic steelmaker who actually to wants to operate it."
Like the workers, Baltimore County has a stake in what happens. It's not just the jobs — it's the taxes.
RG Steel owes the county nearly $4.6 million in property taxes and sewage charges — the mill was about to go to tax sale when the company filed for bankruptcy protection. The county's attorneys said in court documents Wednesday that the local government would object to any sale that didn't result in prompt repayment of those back taxes.
The mill sits on more than 2,400 acres at a prime location, south of Interstate 695 on a peninsula that juts into the
River. But the area is far from pristine.
"More than a century of steel making and finishing operations have resulted in perhaps the most complex environmental cleanup site in the Chesapeake Bay watershed," Baltimore County's attorneys wrote in court documents.
said in a court filing last week on behalf of the
that the federal government would object to any buyer without the wherewithal to continue mandated efforts to find and remediate problems.
"Sale of any Steel Facility to a purchaser who is incapable of performing cleanup and otherwise complying with the law is functionally indistinguishable from abandonment," the federal agency wrote in the filing.
It's not a foregone conclusion that a company specializing in liquidation will tear apart a closed facility and sell it off in pieces. Michael W. Rhodes, president of the Investment Recovery Association, a trade group for specialty firms that turn idle assets into cash, said it depends on the asset.
Sometimes it will be sold to a company intending to operate it, he said. Otherwise, a liquidator will market the pieces that can be sold intact and sell the rest as scrap — potentially tearing everything down to the ground.
"It really boils down to the math, whether it's Hilco or anybody else," said Rhodes, an investment recovery supervisor in Virginia. "When they choose to buy a facility, they'll go in and do an assessment."
Exhibit one is Frontier Industrial Corp., a plant demolition and brownfield remediation company that won the bidding last week for RG Steel's facility in Mingo Junction, Ohio. Craig Slater, Frontier's general counsel, said Wednesday that "lease, sell, operate are all possible alternatives for us."
"Steelmaking is not our core business, but it's a possibility that we'll work together with another company or joint venture to start one or more of the lines of the facility," he said. "It's something we're considering."
Sparrows Point steel mill by the numbers
Making steel since
: 2,000 – largely laid off
: about 30,000
Sale price four years ago
: $810 million
: $72 million
: more than 2,400 on the Patapsco River
Owners since 20