The new owners of the Sparrows Point steel mill are trying to knock a $125 million cash payment in the deal down to $1.9 million, the old owners claim in a lawsuit filed in New York.
The $125 million cash payment is part of a $1.2 billion deal that includes the repayment of $317 million in debt for the mill outside Baltimore and other steel operations in four states.
RG Steel, a unity of tycoon Ira Rennert’s Renco Group, is being sued by Severstal US Holdings, which filed suit Monday in U.S. District Court in New York.
The suit claims the cash payment of $125 million is subject to final adjustments involving debt and working capital, but alleges that RG Steel is trying to adjust the price using impermissible changes in accounting procedures. The suit says the adjustments are also outside the scope of arbitration agreed to in the deal.
Severstal said it was seeking a judgment to “establish that there is no basis for RG Steel’s attempt to obtain a massive price reduction through adjustments that are not covered by the arbitration agreement.”
A Severstal spokeswoman said Friday that the company doesn’t comment on pending litigation. A spokeswoman for RG Steel also said the company would not comment.
RG Steel’s corporate parent, Renco, is no stranger to court battles. Rennert has taken over industrial sites from Peru to Utah and become involved in extensive battles over environmental conditions at the sites.
In Utah, the U.S. Environmental Protection Agency sued MagCorp, its parent companies and Rennert for $902 million in January 2001 over toxic wastes being poured into unlined ditches and a 400-acre pond on Great Salt Lake’s western edge. The EPA has also wrestled for years with Renco over pollution at its Doe Run lead smelting plant in Missouri.
And in Peru last year, President Alan Garcia’s government canceled the license of Renco’s Doe Run mining company to operate a smelter after it didn’t obtain needed financing to improve environmental safeguards.
The Sparrows Point plant is also the subject of environmental litigation, but state and federal environment officials have said RG Steel’s operations at Sparrows Point have complied with terms of a consent decree for the site since the March sale.