NEW YORK The secured lenders and former executives of SGK Ventures LLC, the bankrupt specialty steel scrap processor formerly known as Keywell LLC, have responded to a multimillion-dollar lawsuit filed against them by unsecured creditors, disputing claims made in the suit and filing a motion calling for its dismissal.
The former executives and secured lenders call for the U.S. Bankruptcy Court in Illinois to "dismiss the complaint ... for its failure to state claims and to strike its demands for punitive damages," according to documents filed Feb. 19.
They also issued a press release Feb. 20, entitled "Keywell Executives Fire Back," describing the claims by the official committee of unsecured creditors as "senseless, illogical and unsupported by the facts."
"In addressing the central theory (of the lawsuit), there is a paraphrased question asked by defendants of the plaintiff," the press release said. "Are you seriously claiming that (six) years ago in 2007, Keywell made decisions and took actions knowing that nearly a full year later the most serious banking crisis the world has ever seen would occur, that would lead to one of the longest recessions the world has ever had and through it all ... Keywell continued to operate its business in the normal course, paid out over $1 billion in purchases to its suppliers and vendors, and it did so with a plan to file for bankruptcy in September 2013, harm its creditors, harm its reputation, lose its entire business investment and business future, and Keywell did all of this so it could protect itself from business decisions and actions it made (six) years earlier?"
The unsecured creditors committeea group that includes Fort Wayne, Ind.-based OmniSource Corp. and Orange, Calif.-based SA Recycling LLCfiled the original lawsuit in December as part of the processors bankruptcy proceedings (amm.com, Dec. 20). The suit, which seeks about $65 million in damages, accuses the processors former executives of allegedly engaging in "a pattern of improper self-dealing" that saw management "lining their own pockets to the detriment of Keywell and its creditors."
The press release described the lawsuit as "headline-grabbing" and criticized its use of "ample adjectives and adverbs."
"It tarnishes reputations, and it may make some feel better about how they were put in this position, but it lacks a reasonable basis for making its allegations, is wildly expensive and should not be allowed to continue to waste creditor money in its pursuit while significantly benefiting only the lawyers and consultants," it said.
David A. Agay of Cleveland-based McDonald Hopkins LLC, the law firm representing the unsecured creditors committee, declined to comment on the motion to dismiss the lawsuit or the press release.
The bulk of Keywells assets continue to operate under the name Keywell Metals LLC, a venture established by Southlake, Texas-based investment firm Prophet Equity LP, which acquired the assets for $15.8 million in December (amm.com, Dec. 12). Former Keywell president and chief executive officer J. Mark Lozier now serves as president of Chicago-based Keywell Metals.