NEW YORK Severstal U.S. Holdings LLC has asked a federal bankruptcy court judge in Delaware to relieve a stay motion that is keeping it from enforcing a lien on RG Steel LLCs security interest in Mountain State Carbon LLC.
RG Steel owes and is liable to Severstal for $100.7 million, an amount that is more than the value of the bankrupt steelmakers stake in the Mountain State Carbon operations, Wilbur Winland, vice president and general manager of Severstal North America Inc.s Columbus, Miss., mill, said in an affidavit filed in support of the motion. Winland is also co-controller of Mountain State Carbon, a 50-50 joint venture between RG Steel and Severstal NA.
The request centers on a $100-million promissory note dated March 31, 2011, that RG Steel issued to Severstal. In the note, RG Steels Wheeling, W.Va., operation pledged and granted security interest in all of its rights, title and interest in the Follansbee, W.Va., coke-making operations, Severstal counsel said in court documents. RG Steel still owes the principal amount of the note to Severstal, plus interest, Severstal said.
RG Steel relinquished its operating control and equity stake during bankruptcy proceedings, Severstal said in the documents.
While the Chapter 11 bankruptcy code does not allow creditors to enforce liens as debtors reorganize their operations, RG Steel is no longer a steelmaker; therefore, the Sparrows Point, Md.-based companys interest in the coke-making operations at Mountain State Carbon are no longer necessary to that reorganization, Severstal claimed in the court documents. "The debtors have largely concluded the process of liquidating their assets, including all of their steelmaking facilities. The facilities were sold to liquidators or scrap operations, and there is no indication that any of the facilities will operate again. The debtors are in the process of selling their few remaining assets and raw material inventory. They are not currently operating as a business and do not intend to do so in the future."
Furthermore, RG Steels search for a buyer in its stake in the joint venture has been unsuccessful, Severstal said. RG Steel "provided several potential purchasers with access to financial and operational due-diligence materials, including sensitive operating information, as well as in-person tours of the MSC (Mountain State Carbon) facilities and MSCs management personnel. Notwithstanding the debtors efforts, to Severstals knowledge no offer has been received."
The motion is set to be heard by Judge Kevin J. Carey Jan. 15.
A Severstal spokeswoman declined to comment. RG Steel counsel did not return calls for comment.
A local United Steelworkers union representative told AMM that negotiations with Severstal NA to establish a new contract at Mountain State Carbon, which is currently running half of one of its coke batteries, are still ongoing.