US Steel Bids for Rouge Steel Assets

December 19, 2003 (PLANSPONSOR.com) - Just as the nation's private pension insurer announced its intention to seize Rouge Steel pension plans covering 5,400 workers and retirees, a second bidder has emerged for the bankrupt steelmaker.

Steel giant US Steel Corp. offered to buy Rouge’s assets in a deal worth more than $200 million, which put it in direct competition with Russian steelmaker OAO Severstal and its already submitted bid worth about $215 million, the Detroit News reported.

In its announcement earlier this week, the Pension Benefit Guaranty Corp. (PBGC) said it would assume responsibility for the four Rouge plans, which have $140 million in assets to cover $264 million in projected pension obligations. However, the PBGC said it would step aside if a bidder were willing to also assume the Rouge pension obligations (See  PBGC to Ask For Rouge Steel Plan Terminations ). At this point, neither bidder is expected to take that step, according to news reports.

By acting before the asset sale is complete, the PBGC avoids getting saddled with “shut-down” benefits the UAW negotiated with Rouge Steel. Under the agreement, some workers are eligible for full retirement if the plant shuts down, even if they have not reached the official retirement age of 65.

A US Bankruptcy judge in Wilmington, Delaware is expected to decide the winning bidder by early next week after a Friday hearing with representatives of both US Steel and Severstal. “We’re looking to get the right deal at the right price. We’re not looking for any deal at any price,” Mike Dixon, spokesman for Pittsburgh-based US Steel, told the News.

Severstal is favored to win the bidding after achieving “stalking horse” status from the court, meaning if it doesn’t win the auction, it will be compensated for any costs related to its original bid. The Russians have also won the support of Rouge’s 2,700 workers by currying favor with United Auto Workers Local 600.

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