Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20140122_0000074.SNY.htm/qx
Timestamp: 2017-02-25 02:16:12
Document Index: 246652704

Matched Legal Cases: ['§ 1', '§ 1', '§ 1', '§ 2', '§ 1', '§ 1']

| RG Steel, LLC v. Severstal U.S. Holdings, LLC
RG STEEL, LLC, Plaintiff,v.SEVERSTAL U.S. HOLDINGS, LLC and SEVERSTAL U.S. HOLDINGS II, LLC, Defendants
Decided Date: January 24, 2014
For Severstal U.S. Holdings, LLC and Severstal U.S. Holdings II, Inc., Defendants: Scott D. Musoff, Esq., SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, New York, NY; Albert L. Hogan, III, Esq., Amy L. Van Gelder, Esq., Andrew J. Fuchs, Esq., SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Chicago, IL.
For RG Steel, Plaintiff: Brian E. O'Connor, Esq., Benjamin P. McCallen, Esq., Joshua M. Troy, Esq., WILKIE FARR & GALLAGHER LLP, New York, NY.
Defendants Severstal U.S. Holdings, LLC (" SUSH" ) and Severstal U.S. Holdings II, Inc. (" SUSH II" ) (collectively " Severstal" or " Defendants" ) move pursuant to Rule 12(b)(6) to partially dismiss the Complaint of Plaintiff RG Steel (" RG Steel" or Plaintiff" ).
On October 3, 2011, Severstal filed a complaint seeking a declaratory judgment to bar the arbitration sought by RG Steel and to limit its relief to indemnification. On November 7, 2011, RG Steel sought an order to compel arbitration, appoint an arbitrator and stay this action. On May 23, 2012, RG Steel's motion was granted.
Plaintiff brought the instant action on March 30, 2012. After Defendants disputed the allegations on subject matter jurisdiction, Plaintiff voluntarily dismissed the action on April 20, 2012.
Plaintiff filed the Amended Complaint (" Complaint" ) on June 7, 2013. The Complaint alleges five independent causes of action and seeks to recover for losses and/or damages sustained in connection with RG Steel's purchase of certain steel mills fro Defendants pursuant to the Stock Purchase Agreement (the " SPA" ) entered into in 2011, as well as certain declaratory relief.
On July 22, 2013, Defendants filed the motion to dismiss. On September 30, 2013, the parties stipulated and agreed that Plaintiff's Fourth Cause of Action was voluntarily withdrawn without prejudice. Defendants' motion to dismiss was heard and marked fully submitted on October 2, 2013.
RG Steel is a Delaware limited liability company that manufactures a variety of steel mill products, including hot-rolled, cold-rolled, and coated sheets, and tin mill products. SUSH is a Delaware limited liability company. It is the sole owner of the issued and outstanding equity interests of SUSH II, a Delaware corporation and former owner of the equity interests of Severstal Sparrows Point, LLC (" Severstal Sparrows Point" ). SUSH and SUSH II are subsidiaries of Severstal International, a global steelmaker which has operations in Russia, the United States and elsewhere.
RG Steel, SUSH, SUSH II and Severstal Sparrows Point entered into the March 1, 2011 SPA, which provided that RG Steel would purchase the equity in three U.S.-based steel companies from SUSH. The facilities are located in Sparrows Point, Maryland, Warren, Ohio and Wheeling, West Virginia and were acquired by Severstal between May 2008 and August 2008. In connection with the transaction, RG Steel purchased all of the equity of Severstal Sparrows Point, which in turn owned all of the outstanding equity in Severstal Warren LLC (" Warren" or " Severstal Warren" ) and Severstal Wheeling Inc. (" Wheeling" ). (Compl. ¶ 7; SPA § § 1.01, 1.04.) In exchange, RG Steel agreed to the following payment schedule: (1) $125 million in cash, subject to a purchase price adjustment based on the amount of working Page 372
capital at the company at closing ( Id. ¶ 8.); (2) $100 million in the form of a note (the " Note" ), the principal of which was due five years after closing ( id.); (3) repayment of $317 million of third-party bank debt owed by the Severstal entities ( id.) and (4) $36 million in cash to be paid to two Severstal subsidiaries within one year of closing. ( Id.) The transaction closed on March 31, 2011. (Compl. ¶ 37.)
Section 1.01 of the SPA provides that the " aggregate consideration to be paid by [RG Steel] at the Closing . . . shall be (i) the Note, plus (ii) cash in the amount equal to the Initial purchase Price (as adjusted pursuant to Section 1.04, the Final Purchase Price)." The Note has a principal amount of $100 million, with a maturity date of March 21, 2016, and quarterly interest payments due beginning on June 30, 2012, until the entire principal amount is repaid in full. (Exhibit 1, § 1.1.) The Note also sets forth certain mandatory prepayment events that require immediate payment of the Note in full, including, for example, a change of control or certain sales, transfers, and dispositions of RG Steel's interest in the acquired businesses. (Exhibit 1 Preamble, § 1.5.) In addition, upon the occurrence of an event of default, including RG Steel's bankruptcy, Severstal may declare all or a portion of the Note immediately due and payable. ( Id. § § 2.1, 2.3.)
Section 1.04(a) of the SPA defines the Initial Purchase Price as $125 million, subject to an upward or downward adjustment based on the acquired business's net work capital and certain indebtedness as of the Closing Date, also known as the " Effective Time," as compared with baseline amounts set forth in the SPA. (SPA § 1.04.) The SPA provides for two phases of this adjustment. First, pursuant to a calculation two business days before the Closing, the Initial Purchase Price was subject to an initial upward or downward adjustment based on Severstal's estimate of the net working capital and certain indebtedness as of the Closing Date, as compared with baseline amounts set forth in the SPA. ( Id.) The estimates of net working capital and indebtedness resulted in RG Steel paying only $85 million at the Closing. Severstal U.S. Holdings LLC v. RG Steel, LLC, Case No. 11-cv-6922 (RWS), 865 F.Supp.2d 430 (S.D.N.Y. 2012).
Second, the SPA provides for another, final adjustment to the purchase price based on the difference between final calculations of net working capital and certain indebtedness, and Severstal's estimate of net working capital and certain indebtedness of Severstal Sparrows Point and its subsidiaries, as of the Closing Date. (SPA § 1.04(b).) The second adjustment is conducted through ...