NEW YORK Wells Fargo
Capital Finance LLC has denied claims from creditors of RG
Steel LLC that the bank acted improperly before the
steelmakers bankruptcy because of its relationship with a
Renco Group Inc. executive.
The Santa Monica, Calif.-based
bank called the accusations "baseless," telling the U.S.
Bankruptcy Court in Delaware that it only acted as an agent to
the cash collateral when dealing with Ira Rennert, chairman and
chief executive officer of New York-based Renco.
The issue centers on Wells
Fargos capacity as an agent for the first-lien lenders
based on a 2011 credit agreement. Creditors filed a complaint
in February arguing that Rennert used his personal influence so
that the bank didnt draw down its available cash
collateral, even though it would have made sense for the lender
at the outset of a bankruptcy (
amm.com, Feb. 26).
Wells Fargo, however, denied the
claims, saying it was not the largest holder of debt among the
first-lien lenders, but only an agent. It added that the cash
collateral was an additional, third-party source of security
available to the first-lien lenders, but those lenders had no
legal obligation to apply in order to reduce the debtors
"Wells Fargo never concealed
from the committee its relationship with Rennert or its
preference not to apply Rencos collateral," it said. "No
matter how longstanding a relationship Wells Fargo had with
Rennert, the decision as to whether and when to apply
Rencos collateral was a decision made by the requisite
majority of first-lien lenders, of which Wells Fargo was just
Counsel for the creditors could not be reached for