Unsecured creditors in the RG Steel bankruptcy case withdrew Friday their request to sue the company's billionaire founder.
The Official Committee of Unsecured Creditors had in January asked the U.S. Bankruptcy Court in Wilmington for permission to go after Ira Rennert, alleging that his decisions in the months before RG Steel collapsed were aimed at worsening the company's finances to shore up his own. The committee said it might be able to recover more than $238 million for unpaid vendors and other creditors.
But Friday, the committee withdrew the request without explanation — and "without prejudice," meaning that it could try again later.
A spokesman for Rennert, Andrew Shea, called the committee's claims "frivolous and without merit" when they were first filed. He declined to comment Friday.
Costs could have played a role in the withdrawal.
The committee originally said that it could fund the lawsuit using money RG Steel is seeking to recover from companies paid shortly before its bankruptcy. But an arm of Cerberus Capital Management, which took a partial ownership stake in RG Steel last year in exchange for extending financing, asked the court not to approve such a funding move until the loans are "repaid in full."
One of the committee's allegations is that Rennert delayed RG Steel's bankruptcy — adding to its debt load — so he could unload part of his ownership stake to Cerberus and therefore avoid liability for the company's underfunded pension plans.
The federal Pension Benefit Guaranty Corp., in a suit filed in U.S. District Court in New York this week, made similar liability-dodging allegations aimed at Rennert's Renco Group, parent of RG Steel.
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