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Wells Fargo denies RG creditors’ claims

Keywords: Tags  RG Steel, Ira Rennert, Renco Group, Wells Fargo Capital Finance, first lien, bankruptcy

NEW YORK — Wells Fargo Capital Finance LLC has denied claims from creditors of RG Steel LLC that the bank acted improperly before the steelmaker’s 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 Fargo’s 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 didn’t draw down its available cash collateral, even though it would have made sense for the lender at the outset of a bankruptcy (, 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’ obligations.

"Wells Fargo never concealed from the committee its relationship with Rennert or its preference not to apply Renco’s collateral," it said. "No matter how longstanding a relationship Wells Fargo had with Rennert, the decision as to whether and when to apply Renco’s collateral was a decision made by the requisite majority of first-lien lenders, of which Wells Fargo was just one voice."

Counsel for the creditors could not be reached for comment.

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