RG Steel unveils retention plan
YORKVILLE – Bankrupt RG Steel plans to spend at least $770,000 across 21 people identified in a proposed “key employee retention plan” if the federal bankruptcy court allows its implementation and use through year’s end – what is being called a wind-down phase.
Attorneys for RG filed the motion requesting approval of the plan and its activation Thursday.
The court appointed reorganization officer helped design the particulars of the proposal and is asking the court for its approval, according to the filing.
The requested funds would be paid the individuals to allow their purchase of healthcare coverage previously paid for as a benefit of employment with RG Steel, and which has been discontinued as a direct result of its bankruptcy reorganization.
RG’s newly filed motion will come before the federal bankruptcy court at a hearing scheduled for Tuesday, Nov. 20.
The action drew a response from the United Steelworkers issued Friday afternoon in the form of an “update” to its members via email describing the proposal as “inappropriate, unfair and outrageous”.
“Specifically the company wants to pay a $2,000 monthly stipend for each individual to allow them to purchase health insurance, along with bonus payments of three months’ salary if the individual stays through December 31,” said the USW communication of RG’s motion.
The names of the selected individuals were not publicly released through general access to the filing, though it identified the “essential functions” these employees perform as including sales, accounting, treasury, IT and other related responsibilities.
The union’s informational update to its members made clear the organization’s objections to the RG motion.
“The USW fully intends to make the bankruptcy court aware of our objections to this cash grab. There will be a hearing in Delaware on Tuesday, Nov. 20 and our legal counsel will be present.”
Absent adoption of the plan, RG’s motion alleges that “at best” those same employees would be “less motivated to undertake the substantial responsibilities they have been asked to undertake in connection with the Wind-Down Process, and at worst, would leave the Debtors’ employment entirely,” and “would hinder the Debtor’ ability to realize the full value of their remaining assets”.
Among information shared in the 28 page motion was a reference to what debts had been satisfied to date through monies raised by asset sales, which included selling off steel manufacturing and related resources from Warren, Ohio through the Ohio Valley and east to Sparrows Point, Maryland.
Proceeds from RG having sold their primary steel making facilities and assets during the initial four months of the bankruptcy reorganization cases were used to “pay down their senior secured prepetition and postpetition debt in full,” according to the motion filing.
“In the coming months, the Debtors will shift their focus to conducting a value-maximizing wind-down of their estates, including liquidating their remaining inventory, collecting accounts receivable, analyzing and pursuing preference/avoidance actions and other litigation claims, and conducting the claims reconciliation process.
“The recoveries what will ultimately be realized by the Debtor’s remaining secured and unsecured creditors depend, in large part, on the extent to which the Debtors are successful in these endeavors. Therefore, it is crucial that the Debtors retain the personnel necessary to achieve the best results possible in the wind-down process.”
RG’s motion also offered that “no outside personnel retained to effect such liquidation would be likely to realize the value from such inventory that the key employees will be able to realize as a result of their knowledge of the debtors products and supply chain, and their relationships with the debtors’ customers.”
The document also states the impact of the plan’s adoption on the 21 persons would be expected to have a positive impact on their “morale”.
The filing’s assertions included the point that approval of the plan would provide those employees “with a greater sense of financial security, thereby eliminating a potential distraction that could adversely affect performance”.
RG Steel stated in the motion that the plan “is designed to ensure that the Key Employees remain dedicated and committed to the success of the Wind-Down Process.”
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