The executives whom RG Steel's unsecured creditors want to sue for allegedly mismanaging the bankrupt company said in court filings this week that the claims are baseless.
The Official Committee of Unsecured Creditors asked permission in February to sue the founder and chief executive of the Sparrows Point-based steelmaker, alleging that founder Ira Rennert worsened the company's financial situation to improve his own and that his CEO went along with it.
Among the claims: that Rennert delayed an inevitable bankruptcy and added to RG Steel's debt to dilute his ownership, an attempt to avoid liability for the company's underfunded pension plans. The federal Pension Benefit Guaranty Corp. made similar claims against Rennert's Renco Group — the parent company — in a lawsuit filed in January.
But Rennert said in a Tuesday filing that the unsecured creditors' request to sue him and Renco "is riddled with flaws." For instance, the filing argues, it would make no sense to try to avoid a potential $70 million pension obligation by forcing RG Steel to take on $218 million in debt and subordinate the $130 million in loans held by its parent company.
RG Steel CEO Vincent J. Goodwin said in a separate filing that the creditors don't have standing to pursue a derivative suit on behalf of an insolvent limited liability company formed in Delaware. He called the claims "trumped up and implausible."