Judge approves RG Steel management bonuses
Wednesday, 25 July 2012 12:02

RG Steel is looking to sell or liquidate its mill at Sparrows Point in the wake of its bankruptcy filing in May. photo by Roland Dorsey

$20 million to be awarded to 10 executives

by Nicole Rodman

Last Wednesday, RG Steel, owner of the steel mill at Sparrows Point, received a judge’s consent to award multi-million dollar bonuses to 10 company executives.
    During a hearing in U.S. Bankruptcy Court in Wilmington, Del. on July 18, Judge Kevin J. Carey approved the proposed $20 million in bonuses after RG Steel slightly altered its original proposal.
    On July 6, U.S. Trustee Program representative Roberta A. DeAngelis filed a motion contesting the proposed bonuses, stating that they do “nothing to create an incentive for higher levels of individual performance.”
    The U.S. Trustee Program is responsible for overseeing bankruptcy cases.
    DeAngelis also objected to the proposal’s stipulation that the bonuses be awarded regardless of the outcome of the sale of RG Steel’s assets.
    Likewise, the Committee of Unsecured Creditors, representing such creditors as the United Steelworkers of America, also balked at the bonus proposal, stating that the steelmaker “stands to provide outsized rewards to the participants, even if their efforts do not produce a going-concern sale of any part of the business.”
    Both the U.S. Trustee Program and the Committee of Unsecured Creditors worried that the bonuses would be given even if the steelmakers’ assets were “relegated to quick liquidation sales at the minimum realistic values.”
    U.S. Representative C.A. Dutch Ruppersberger also criticized the bonuses, calling them “absolutely outrageous.”
    At the time, R.G. Steel defended the proposed bonuses, noting that company management is “committed to seeing the sale and Chapter 11 [bankruptcy] process through, but deserves a reasonable and appropriate incentive to continue to perform at the highest levels.”
    In an apparent response to these objections, last week RG Steel modified their original proposal to make the bonuses contingent on the sale (or liquidation) of the steel mills at prices approved by the company’s secured lenders.
    These lenders include Wells Fargo Capital Finance and General Electric Capital Corp.
    According to the new plan, bonuses will be paid only after the company’s senior and junior lenders are paid.
    These senior lenders include Wells Fargo, General Electric, Bank of America, Merrill Lynch and USB Securities.
    Junior lenders include The Renco Group, owned by RG owner Ira Rennert and Cerberus Business Finance.
    With these alterations made, Judge Carey approved the new bonus proposal, putting aside objections by DeAngelis and others.
    Though, at first, unwilling to release the names of the 10 executives slated to receive the bonuses, last Wednesday the steelmaker relented under mounting public pressure.
    Those likely to receive bonuses (exact amounts remain confidential) include RG Steel chief executive officer John Goodwin and Sparrows Point general manager Glen Mikaloff.
    Other top employees likely to receive a bonus are RG Steel chief financial officer Rich Caruso, chief administrative officer Dave Pryzbylski, chief operating officer Mark Whalen, chief commercial  officer Jerry Nelson, comptroller Jeff Gennuso, general counsel Howie Japlon, vice president of quality assurance George Lukes and Tom Cera, general manager of the Warren, Ohio and Wheeling, W.Va. mills.
    Neither United Steelworkers Local 9477 president Joseph Rosel nor RG spokeswoman Bette Kovach responded to requests for comment.
    Just days after the judge approved the bonuses, on July 20, RG Steel reached agreement to sell the Steubenville, Ohio, property to Wheeling, W.Va-based River Rail Development LLC.
    River Rail Development is a subsidiary of Strauss Industries, a metal recycling company.
    While the property was originally considered to be worth an estimated $15 million, the final sale price was just $4.3 million.
    As Steubenville community activist Ed Looman told the Steubenville’s Herald-Star, “I would love to see us back making steel, but it’s not in the cards ....”
    Closer to home, the closure of the RG Steel plant at Sparrows Point has led Siemens Industry, Inc. in Sparrows Point to lay off 38 employees.
    The workers, mostly heavy industrial mechanics, were occupied primarily with maintaining the steel caster machines at the Sparrows Point mill.
    As Siemen’s Baltimore general manager, Mike Powers, told the Baltimore Business Journal last week, “A lot of their services were provided to RG steel, so when RG steel shut down, they also ended up shutting down.”
    According to the Maryland Department of Labor, Licensing and Regulation, laid-off workers from Siemens will be eligible for benefits from the federal trade adjustment assistance program in addition to regular unemployment benefits.