Jan 29 The U.S. Pension Benefit Guaranty Corp has sued Renco Group Inc for $97 million, accusing it of trying to avoid the pension obligations of bankrupt steelmaker RG Steel LLC, a court filing showed.
Renco Group, founded by New York billionaire Ira Rennert, had a controlling interest in RG Steel, which had sponsored two pension plans for about 1,350 people.
Last year, Renco sold 24.5 percent of its ownership stake in RG Steel to an affiliate of the New York-based investment firm Cerberus Capital Management before the steelmaker filed for Chapter 11 protection.
The Pension Benefit Guaranty Corp (PBGC) said in the court filing that Renco had reduced its ownership stake in an attempt to free itself from RG Steel's pension obligations. It said in the filing that ownership of 80 percent or more in RG Steel would have made Renco responsible for the steelmaker's pension plans.
The $97 million in damages sought by the PBGC includes the plans' unfunded benefit liabilities, unpaid minimum funding contributions and termination premiums.
Renco is a private holding company that makes long-term investments in companies across a range of industries, including mining and steel. It and its subsidiaries employ more than 20,000 people worldwide and have revenues in excess of $5 billion annually, the filing showed.
"The facts will show that these claims are baseless," Andrew Shea, a spokesman for Renco Group, told Reuters on Tuesday.
RG Steel filed for Chapter 11 bankruptcy protection last May, saying it could not overcome the deterioration of the steel market and would sell off the three plants it had bought from Russian steelmaker Severstal for $1.2 billion.
The PBGC is a U.S. government agency that was created by the Employee Retirement Income Security Act of 1974 to encourage the continuation and maintenance of private-sector defined benefit pension plans.
The PBGC is not funded by general tax revenues. It collects insurance premiums from employers that sponsor insured pension plans, earns money from investments and receives funds from pension plans it takes over.
The case is Pension Benefit Guaranty Corp vs The Renco Group et al, Case No. 13-cv-621, U.S. District Court, Southern District of New York.