Oct. 25–A New York investment group is offering $225 million to buy the assets of struggling Fairlawn steelmaker Republic Engineered Products.
Perry Strategic Capital Inc. said it plans to help “rebuild and revitalize” Republic’s steel operations and help the firm emerge from bankruptcy.
The offer will be discussed at a hearing in U.S. Bankruptcy Court in Akron at 1:30 p.m. Tuesday.
Republic, which is strapped for cash and recently defaulted on loans, has petitioned the court to designate Perry as the “stalking horse,” or lead bidder.
The steel maker said Friday that the offer from Perry is subject to higher and better offers. Republic has hired Lehman Brothers, a New York investment bank to help it review other offers.
Republic said it has not received any other offers, although it has been in ongoing discussions with interested parties.
But at least one other firm, Renaissance Partners Inc. in Cleveland, said it remains interested. The firm tried to buy some assets from Republic’s predecessor, Republic Technologies International, while it went through liquidation last year.
“We continue to have an interest,” said George P. Petrenko, a principal with Renaissance. “We’re going to see what develops in the coming weeks.”
Perry has been involved in turning around several other operations, including FTD Inc. and Allegheny Energy of Hagerstown, Md.
“Perry Strategic Capital strongly believes in Republic’s management team and the 2,400 employees and the company’s efforts to emerge from bankruptcy,” Paul Leff, Perry’s senior managing director, said in a statement. “We bring substantial capital and experience to assist management’s continued efforts to rebuild and revitalize Republic.”
Perry is offering up to $70 million in cash, $80 million in new notes and $75 million in assumed liabilities.
Republic is now owned by KPS Special Situations Fund and Hunt Investment Group, which paid $463 million to take the steel maker out of bankruptcy last year.
Several steel experts say KPS and Hunt overpaid for Republic and were left with too much debt and too little cash to turn the struggling company around.
The new bidder, Perry, seems to have deep pockets. The firm is a private equity arm of Perry Capital, which manages more than $5 billion in hedge funds and other investments. Hedge funds are speculative, high-risk investments.
“There’s a slew of hedge funds out there that want to buy distressed steel mills,” said Charles Bradford, a steel consultant in New York. “They saw how Wilbur Ross bought the old LTV facilities cheaply and made a success of it. When you have one guy making a success, there’s a lot of imitators who want to do the same thing.”
Republic is the largest maker of special quality steel bars, a product used in axles, drive trains, suspensions and other components of vehicles and industrial equipment. It has about 2,400 employees at its Fairlawn headquarters and facilities in Canton, Massillon, Lorain and in Lackawanna, N.Y; and Gary, Ind.
But the company has been struggling. In recent years, its predecessor closed operations in Canton, Baltimore, Johnstown, Pa., Willimantic, Conn., and Batavia, Ill.
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FTDI, AYE,
