PBGC sues Renco Group over RG Steel pension obligations
By Hazel Bradford | January 29, 2013 3:30 pm
Pension Benefit Guaranty Corp. is suing holding company The Renco Group for alleged misrepresentations before the agency's takeover of two RG Steel LLC pension plans in which the company had a controlling interest.
The lawsuit, filed Monday in the U.S. District Court in Manhattan, alleges that when The Renco Group sold a 24.5% ownership stake in RG Steel, Sparrows Point, Md., to an affiliate of Cerberus Capital Management in January 2012, Renco reduced its ownership stake “in an attempt to free itself from responsibility for RG Steel's pension debts,” according to the complaint.
When the PBGC raised concerns about the transaction, “Renco gave assurances that no transaction changing its ownership status was imminent,” according to a PBGC statement. Five months after the Cerberus transaction, RG Steel filed for Chapter 11 protection in U.S. Bankruptcy Court in Wilmington, Del., and began to sell off assets.
“A principal purpose of this proposed transaction was to dilute Renco's ownership in RG Steel below the 80% threshold set forth in ERISA in order to break up the controlled group,” the complaint said.
“The facts will show that these claims are baseless,” said Renco Group spokesman Andrew Shea in an e-mail.