Litigation with Renco will not affect asset sale in U.S. - Severstal
MOSCOW. Oct 12 (Interfax) - Severstal says that any outcome of its lawsuit against RG Steel (a part of Renco Group) will not affect the sale of three factories to the United States - Severstal Sparrows Point, Severstal Warren and Severstal Wheeling, which is already closed.
By the close of the deal on April 1, 2011, Severstal had already received funds of $85 million and a five-year secured promissory note of $100 million. It is due to receive another $36 million within a year of the deal's closing. The factories' liabilities were passed on to RG Steel, in accordance with the contract. The entire deal is valued at roughly $1.2 billion.
In June, RG Steel decided to knock down the cash price to be paid for the purchases from $84.9 million to $1.9 million. Severstal considered this baseless and filed a lawsuit against the company in New York.
The contested sum will not noticeably impact Severstal's financial results, a representative of the company said.
Severstal acquired the three factories in the first half of 2008. After the crisis, they ceased to be profitable, were shut down due to high production costs and were put up for sale. The deal to sell them to Renco Group businessman Ira Rennert was completed on April 1, 2011. Severstal's financial consultant in the deal was Evercore Partners, and its law consultant was Skadden, Arps, Slate, Meagher & Flom LLP.
In its suit against Renco, Severstal says that RG Steel's price adjustments of "at a minimum, $44.4 million, are based on impermissible changes in US GAAP." Severstal's lawyers insist that the company, which has experience in the industry, should have understood the accounting practices in making the deal, as it conducted due diligence of the assets.
Severstal has assets in Russia, North America, Europe, Africa, Kazakhstan and Ukraine. Its main beneficiaries are its General Director Alexei Mordashov, who owns over 82% of Severstal, and its free float is around 18%.