In a landmark development, retirees embroiled in a long drawn out battle with controversial multimillionaire Ira Rennert of the Renco Group have won a reprieve in the form of a settlement. Ira Rennert is a mining industrialist who made headlines as a junk bond king and for his larger than life mega mansion in the Hamptons that’s been valued at USD 248 million.
Landmark win for retirees as pension cut to be reversed
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A group of retirees impacted by a pension termination had contested the move, which would have required the government to manage the pension fund after a company that declared bankruptcy (in this case Ira Rennert’s) cut it off. In such cases, with the government insurance being limited, retirees usually have to cope with a huge drop and major losses. However, respite came in the form of an announcement by the Pension Benefit Guaranty Corporation that required the termination to be unwound. It has been 42 years since the federal run agency last made such a judgment that turns back such a termination. As the Executive Director of Pension Benefit Guaranty Corporation, Tom Reeder said, this was a rather extraordinary result for the retirees because it is most unusual for pension to be cut only to be restored back to their original value later.
As per the agreement, as many as 1350 retirees who once worked at RG Steel, a subsidiary firm of the Renco group, will now get the money they missed from the date of termination – November 2012 – till date.
What makes RG Steel different
RG Steel’s case is quite unlike the 4600 or so pension plans that the federal agency had to step in and take over after a judge’s ruling declaring this the only option for the company to restructure itself. For one thing, while RG Steel itself went bankrupt back in 2012, the parent company Renco Group is far from bankrupt.
Due to the special terms invoked in such cases, Rennert’s entire business including smelters, mines and lines worldwide, as well as his huge estate on Long Island were exposed. Renco, on its part, said the settlement arrived at was a practical outcome that made economic sense as well for those involved. It helped bring to a close the ‘significant expense and distraction’ that results from such a long litigation process.
History repeats itself for Renco
Renco had been through a similar experience just a decade ago when Rennert’s Fair Field property was almost seized by the pension agency against a USD 189 million shortfall in the pension owed to WCI Steel employees, before termination could go through. The government eased pressure on Rennert and Renco after they agreed to pay pensions to retirees.
RG Steel too went the same way, after a 2011 purchase by Renco. The pension for the company was then underfunded by almost USD 70 million and the company went bankrupt in 2012. Renco sought financing from PE group Cerberus which acquired a 24.5 percent stake in RG Steel, just the tipping point needed to bring Renco’s ownership below 80 percent thereby absolving it of responsibility for pension obligations. When the federal government sued Renco for fraud that had been designed to delink the wealth of Renco from the obligations of RG Steel, the company vehemently denied any such intent. This three year long battle now comes to a close and over a thousand retirees can now breathe easy.
This article was first published at Financial Buzz, by Henry Wong
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