Ira Rennert

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Ira L. Rennert
Born 1934 (age 79–80)
Brooklyn, New York
Residence Sagaponack, New York [1]
Alma mater B.A. Brooklyn College
M.B.A. New York University[1]
Occupation Investor
Net worth Decrease US $ 5.5 billion
(September 2013)[1]
Religion Judaism
Spouse(s) Ingeborg Hanna
Children 3

Ira Leon Rennert (born 1934) is an American investor and businessman. Using junk bonds to finance his acquisitions of companies, often in bankruptcy, Rennert has amassed significant holdings in basic, cyclical industries, such as mining and metals, including lead smelters, magnesium producers, industrial fixture suppliers, and vehicle assembly lines. Today he controls one of the nation’s largest privately held industrial empires, and his personal fortune is estimated to be $5.9 billion.[2]

Background and education[edit]

Rennert is a graduate of Brooklyn College in 1954, and earned his master's degree from New York University's Stern School of Business in 1956,[3] where he later was on the Board of Overseers.[4]

Photograph of Ira Rennert's compound in Sagaponack, New York, as viewed from above

Early career[edit]

Rennert started his career as a credit analyst on Wall Street in 1956. He also served briefly as a salesman for a typewriting company, a stock brokerage and a partner at Rubin, Rennert & Co.,[5] before launching his own business, I. L. Rennert & Co. in 1962 based at a Beaver Street office in Lower Manhattan. At this time he was censured by the National Association of Securities Dealers (NASD) for operating with insufficient capital. This occurred again in 1963 and as a result, his license was revoked on November 29, 1964, effectively banning him from the securities industry. According to a company spokesman, Jon Goldberg: "Due to market conditions, the firm found itself in violation of the net capital rule and Rennert raised capital and put it into the firm to bring it into compliance. However, the firm once more fell beneath the net-capital requirements and he shut the company down."[6]

Rennert was a consultant for the next eleven years (Who’s Who entry) and entered the private equity market. His role was to put together small leveraged buyouts of unwanted companies. In 1975 he bought a sewing machine maker, and a few years later purchased Covert Marine Inc. of Kansas City (forced into bankruptcy in 1992), followed later by a group of hardware stores and lumber companies. In the early 1980s he joined the board of Integrated Resources Inc, a company financed by Michael Milken where he learned the art of raising junk bonds to finance additional acquisitions.

Junk bond financing[edit]

Milken—as a bond trader for Drexel Burnham Lambert—was successful selling high-risk, high-yield bonds issued by struggling or undercapitalized companies. Before Milken, these were considered ‘junk’ and most investors avoided them, but it was Milken’s innovation that formed a strategy of using these junk bonds to provide capital for corporate raiders to conduct hostile company takeovers. Integrated Resources raised $2 billion in junk bonds financed by Milken but ultimately collapsed amid scandal and defaulted on $1 billion of bond debt in May 1989 (cf. the 1991 book Den of Thieves about the junk bond scandal). As an outside board member, Rennert was not dragged down by the collapse and began to raise junk bonds on his own behalf to finance acquisitions for Renco.

Rennert's strategy for building Renco was to acquire all the shares of struggling companies and to finance the acquisition by issuing junk bonds. Along the way, Rennert paid substantial dividends out of the business to himself. In a series of junk bond issues since 1995, Renco’s subsidiaries have borrowed an estimated $1.1 billion and transferred $322 million (29 percent) to Renco Group, according to documents filed with the SEC.[7] Backed by blue-chip mutual funds and hedge funds such as John Hancock Funds LLC and Putnam Investment Management LLC, Rennert now didn’t have to invest much of his own money. His purchase of AM General in 1992 was bought with a down payment of just $10 million. In 1994, Fluor Corp. of Los Angeles sold Doe Run to Renco, with the latter paying $52 million in cash, and approximately $60 million in debt payable over an eight-year period. In 1997, Doe Run went on to pay $247 million for a similarly environmentally troubled lead smelting complex from the Peruvian government, as well as borrowing more money to service its Fluor debt. And in 1998, Doe Run sold $305 million in junk bonds for financing its Peruvian acquisition as well as more lead mines in Missouri (according to Doe Run filings with the SEC). Since 1998 most Renco financings have been bank debt.

Transactions and Subsidiaries[edit]

WCI Steel[edit]

Rennert's first big deal came in 1988 when Renco bought a Warren (Ohio) steel company from its bankrupt parent, LTV Steel Co., for a price tag of $140 million, of which half was paid for with debt. This company then became WCI Steel Inc., and Rennert was able to ultimately sell bonds totalling $300 million, paying $108 million of the proceeds as a dividend to Renco.[7] In 1998, Renco Steel Holdings Inc. was created to serve as a holding company for WCI. The holding company then sold $120 million in junk bonds, this time paying an additional $100 million dividend to Renco.

After a strike in 1995, Rennert, as WCI Steel’s chairman, agreed to create a new pension plan for the 2,000 employees and retirees whose old plan had collapsed in the previous bankruptcy. In 2003 when WCI’s $300 million of notes came due, the company was unable to pay and declared bankruptcy. With steel prices rising, an investment group led by Rennert came forward with reorganisation proposals that pledged to keep the WCI pension plan going, reviving it by investing $66 million over four years, leaving a $100 million plus shortfall. The plan emerged as the front runner, but ultimately Rennert's proposal was blocked by Harbinger Capital, the leading holder of the notes, and Harbinger acquired the business. At the time of the bankruptcy, if the pension plan had been terminated, the Pension Benefit Guaranty Corporation calculated a $117 million shortfall.[8] Despite losing the company, Renco agreed to assume responsibility for the existing pension plan, with ongoing support from WCI.[9] Newspaper reports speculated that the Pension Benefit Guaranty Corporation had threatening to put a lien on Rennert’s personal estate in order to ensure the steelworkers’ benefits.[10] Harbinger sold the business to Severstal, a steelmaker based in Russia, which was forced to shut down steel-making operations in the fall of 2008 because of the recession.[11] The plant was reopened in 2010, and as of March 2011 was been sold back to Rennert, as part of the RG Steel transaction described below.

MagCorp/US Magnesium[edit]

In 1989, Renco acquired the US’s largest magnesium producer in Utah for an undisclosed price. Removing minerals from the water of the Great Salt Lake, Magnesium Corp. uses chemicals to refine the magnesium used in products ranging from bombs to bicycles. In 1996, Renco established Renco Metals Inc as a holding company for Magnesium Corp. and issued $150 million in bonds. Just like WCI, the company paid Renco $90 million in dividends by the year end. In 2001, the Department of Justice filed suit against Magnesium Corp. for multiple violations of hazardous waste law (the EPA ranked Renco’s holdings as the nation’s 10th largest polluter), but also it cited Rennert’s removal of money from Magnesium Corp. through the bond issue, ‘leaving the companies insolvent and unable to pay their bills'.[7] The suit went on until 2007 when a judge ruled in favor of Renco and against the DOJ. On August 17, 2010, A 10th Circuit Court of Appeals ruling overthrew a district court judge's Oct. 17, 2007, decision that the U.S. Magnesium facility in Rowley was not illegally disposing five wastes. The initial lawsuit DOJ filed on behalf of EPA in 2001 claimed U.S. Magnesium was not following regulations promulgated under the Resource Conservation and Recovery Act of 1976, which dictates how waste byproducts must be disposed. Renco continues to operate the business under the name US Magnesium. At this point, US Magnesium is the only magnesium producer in the United States. The EPA published its proposal to place the US Magnesium facility on the National Priorities List (NPL, a "Superfund site" under CERCLA) in the Federal Register on September 3, 2008. The National Priorities List (“NPL”) is a list of places, commonly known as “superfund sites,” considered national priorities for environmental remediation because of known or threatened releases of hazardous substances. EPA received comments on the proposal through November 24, 2008, including over 300 comments supporting the listing from the public and 100 pages of comments from US Magnesium. EPA prepared a response to comments and published the final listing on the NPL in the Federal Register on Wednesday, November 4, 2009. USM filed its petition for review of the listing in the United States Court of Appeals for the District of Columbia Circuit on November 5, 2009. The hearing was on November 5, 2010. On January 14, 2011, the United States Court of Appeals sided with the EPA and upheld placing the site on the National Priority List.[12]

AM General[edit]

In 1993, Renco acquired AM General from LTV to help LTV emerge from bankruptcy. Terms included a $67.5 million cash payment with the remainder to be paid in various forms over a 10-year period. AM General produced vehicles for industrial, military, and government use, including the Humvee, which was the heavy-duty military replacement for the jeep. The vehicle later became available in a civilian version sold under the Hummer brand name. AM General sold the rights to the Hummer name for civilian use to General Motors in 1999 but built the H2 vehicles for GM until it was discontinued in 2008. Renco was fortunate that the Gulf War dramatically increased demand for the military Humvees at a time when many of Renco's other subsidiaries were struggling. On August 20, 2004, it was announced that Ronald Perelman's MacAndrews & Forbes Holdings company would buy 70% of AM General from Renco. The deal reportedly cost close to US$1 billion.[13]

Environmental Track Record[edit]

The Renco Group's environmental record has been mixed. Rennert has acquired old industrial businesses which, by their nature, are environmentally challenged and polluting. Over time Renco has invested in and / or improved the environmental record of the acquisitions.

United States[edit]

Further information: Doe Run Company

The Renco Group's environmental record in the US related to Doe Run provides a good example of this development. In 1998 the EPA placed Renco Group business holdings 10th on the nation's largest polluter list primarily because of emissions from US Magnesium in Utah (formerly MagCorp).[14] (US Magnesium was purchased by Renco in 1989 in the year in which its emissions peaked at 119,000 tons per year.)[15] By 1998, the year the Renco was placed on the EPA list, Renco had reduced emissions at US Magnesium by 50%.[16] By 2005, the most recent year of data released by the EPA, emissions had been reduced by 97%.[16]

In 2001, the Justice Department and EPA took action against Renco, filing suit against the company. The agencies demanded nearly $1 billion in fines, alleging MagCorp (a Renco Metals Inc. subsidiary) dumped toxic waste in ditches and ponds on the Great Salt Lake, Utah.[17] The suit claimed PCB-laced sludge and dust choked the plant's plumbing, wastewater ponds, landfill and ditches, where contaminants were 12 times the allowed limit for accidental release.[17] MagCorp maintained it was exempt from the federal Resource Conservation and Recovery Act, which requires companies to monitor certain kinds of hazardous waste.[17] Magcorp declared Chapter 11 bankruptcy shortly after the lawsuit began and a federal judge allowed Rennert to restructure MagCorp — now U.S. Magnesium — which exempted it from previous legal liability.[18] The EPA suit, however, remained outstanding until October 2007 when a federal judge ruled against the EPA and the Justice Department and in favor of Renco and MagCorp / US Magnesium.[19]

Today, U.S. Magnesium is the third largest magnesium producer in the world. US Magnesium’s environmental improvements and recent track record have been substantial and include a reduction of emissions by 90% since 2000 (97% since 1989).[16] The EPA data recognizes this as the single largest reduction in air emissions in the category of hazardous air pollutants since the TRI began in 1987 at any single facility.[20] Also, the energy improvements in US Magnesium’s manufacturing process caused a net reduction of 100,000 tons per year of carbon dioxide emissions.[20] US Magnesium was the recipient of a 2004 Climate Protection Award from the EPA.[21] and won an MEP award in 2006 for Environmental Consciousness.

Another US unit of Renco also faced environmental issues in Herculaneum, Missouri and has made substantial improvements. Locals in Herculaneum claimed their children were suffering from lead poisoning traceable to toxic emissions coming from Renco's Doe Run lead smelting plant which had been in operations locally since 1892.[22] In 2000, the EPA and the Missouri Department of Natural Resources tested area lead levels and ordered Doe Run to clean up locations where lead levels exceeded EPA standards.[22] A 2002 study showed more than half of the children living within a quarter mile of the smelter had high blood-lead levels.[22] Doe Run agreed to buy 160 homes in the contaminated area around the smelter at a cost of more than $10 million.[22] An EPA fact sheet noted the following: "Since 2001, EPA, MDNR and The Doe Run Company have addressed lead contamination in Herculaneum through a series of actions which have included residential soil replacements, home interior cleanups, and a voluntary residential buyout program. EPA and MDNR continue to work with Doe Run to address stabilization, erosion control, flood protection, stormwater collection and treatment, and wetland mitigation related to the slag pile area at the site. EPA and MDNR are also working with Doe Run to address soil recontamination of residences near the smelter and contamination along city haul routes."[citation needed] In the first quarter of 2007, Doe Run met all of the National Ambient Air Quality Standard (NAAQS).[citation needed] In 2013, Doe Run shut down its lead smelter, entirely discontinuing emissions in Missouri. [23]

Peru[edit]

Further information: Doe Run Company

Doe Run, Peru, (a Renco Group holding) operated a smelting plant in La Oroya, Peru until 2010, that had similar types of environmental challenges to those faced in Herculaneum, but on a larger scale.[24] The La Oroya smelter began operations in 1922 and was operated for many years by Centromin, a Peruvian government agency, without any environmental controls. It was sold to Doe Run in 1997 primarily because the Peruvian government passed a law which required environmental improvement at the business. This improvement was beyond the economic and technical capability of Centromin. As part of the sale to Renco, Centromin agreed to pay to remediate pre-existing (pre-1997) environmental problems and Doe Run Peru agreed to make substantial environmental investments. These investments were estimated to be approximately $100 million at the time of the deal. In the end, Doe Run ended up invested more than $300 million in environmental remediation during its ownership and was not able to clean up the site to achieve the standards required by Peruvian law.[25] La Oroya was and remains a very polluted site. The Blacksmith Institute placed La Oroya on its list of ten most polluted places in the world, along with Chernobyl, Ukraine.[26] In August 2007, it was reported that air levels of arsenic levels were 85 times more than the "safe" level, cadmium 41 times, and lead 13 times more.[27] A study by St. Louis University scientists found that 97 percent of children in La Oroya suffer from mental and physical deficiencies related to their exposure to polluted air.[26] Ultimately, Doe Run Peru was a bad investment for Renco on many counts. Renco received substantial negative publicity regarding its ownership and the environmental problems in La Oroya. The environmental problems were not solved despite huge investment by Renco. And Renco never made any financial profit from its investment.[25]

Doe Run Peru is currently in a dispute with the Peruvian government which in part relates to Doe Run's claims that Centromin did not live up to its obligations with regard to cleaning up the pre-existing pollution.[25]

Philanthropy[edit]

Ira Rennert ranks #132 on Forbes Magazine's list of World Billionaires.[28] He also ranks #29 on the Jerusalem Post's list of the World's 50 Richest Jews.[29]

Rennert and his wife Ingeborg have made many charitable donations to various organizations. They donated $5 million to establish the Wiesel Center at Boston University and $250,000 to the Lincoln Center. They also gave over $1 million to the World Trade Center Memorial and established the Rennert Entrepreneurial Institute of Sy Syms School of Business at Yeshiva University. They have endowed chairs at several different universities, including a chair in Jewish studies at Barnard College, a Chair in Aging Research at Albert Einstein College of Medicine, a Chair in Stem Cell Biology at Albert Einstein College of Medicine, and the Ira Rennert Professorship of Business at Columbia University.[30][30] They also established the Ira Leon Rennert Professor of Entrepreneurial Finance at New York University and founded the Ingeborg Rennert Center for Jerusalem Studies at Bar Ilan University. The Rennerts also helped to fund the restoration of the Western Heritage Wall in Jerusalem (the visitor's center is called The Ingeborg and Ira Leon Rennert Hall of Light). Rennert's wife and children as named as the donors of The Jonas Mendel (Yonah Menachem Ben Mendel) Rennert Memorial Chapel at the Center for Jewish History. The Rennerts are known to have donated to Rav Aharon Bina's new yeshiva in Israel, Yeshivat Netiv Aryeh, and are additionally honored with a plaque as well as their family upon entrance into the building. They also donated hundreds of Torah scrolls to communities in Israel.[31] The Rennert family also funded the construction for a new mikvah at the Fifth Avenue Synagogue, which was completed in May 2010.

Political activity[edit]

Rennert is a major Republican donor. He has contributed money to John McCain, Rudy Giuliani, and other candidates.[32]

Personal life[edit]

Family[edit]

Ira Rennert is married to Ingeborg Hanna Rennert. Ingeborg, a former airline ticket agent, is a convert to Judaism[33] and serves as the Director of Lincoln Center for the Performing Arts, Inc.[34] They have three children:

  • Tamara Rennert Winn[35]
  • Yonina Rennert Davidson[36]
  • Ari Rennert[37]

Rennert is a member of the orthodox Fifth Avenue Synagogue[38] where he is also honorary chairman.[39]

Houses[edit]

Rennert caused controversy among his neighbors by building a beach front home in Sagaponack, New York, considered one of the largest occupied residential compounds in the United States.[40] The house outraged locals, who claimed Rennert originally planned to use it as a spa, a hotel, or a religious retreat. Rennert denied such allegations, and the local paper later issued an apology.[41] Rennert named his home after the adjoining body of water, Fairfield Pond. The house faces the Atlantic Ocean and its grounds measure 63 acres (250,000 m2). The buildings, which total over 110,000 square feet (10,000 m2), including the 66,000-square-foot (6,100 m2) main house, have an Italianate facade, 29 bedrooms, and 39 bathrooms. The house has a dozen chimneys and a Mediterranean-style tile roof as well as a 91-foot (28 m) long formal dining room, a basketball court, a bowling alley, two tennis courts, two squash courts, and a $150,000 hot tub. Its property taxes in 2007 were $397,559.00. Based on these taxes, the home is currently valued at $198 million[28] making it the most valuable home in the United States. Besides his house in Sagaponack, Rennert owns a duplex apartment on Manhattan’s Park Avenue, a home in Israel, and a Gulfstream V jet.

See also[edit]

References[edit]

  1. ^ a b c Forbes: The World's Billionaires - Ira Rennert September 2013
  2. ^ . Forbes.com. March 2011 http://www.forbes.com/profile/ira-rennert. Retrieved 19 August 2011.  Missing or empty |title= (help)
  3. ^ Reference Book of Corporate Managements. Dun & Bradstreet. 1993. p. 1872. 
  4. ^ "The Board of Overseers". New York University Leonard N. Stern School of Business. Retrieved 2007-08-01. 
  5. ^ "SEC News Digest - Dixie Dinettes Files for Secondary". Retrieved 28 June 2013. 
  6. ^ Thornton, Emily; Rutledge, Susan; David Welch (2003-02-13). "Ira Rennert's House of Debt: How leverage made millions for a tarnished financier--and investors lost out". Business Week. Retrieved 17 December 2008. 
  7. ^ a b c "Doe Run owner built empire on junk bonds". St. Louis Post-Dispatch on Sunday. 14 April 2002. Retrieved 17 December 2008. [dead link]
  8. ^ http://www.corpwatch.org/article.php?id=13215
  9. ^ http://www.rencogroup.net/news/WCI.pdf
  10. ^ Walsh, Mary Williams (2006-02-04). "U.S. Moves to Seize Bankrupt Steel Maker's Pension Plan". New York Times. Retrieved 17 December 2008. 
  11. ^ http://www.tradingmarkets.com/.site/news/Stock%20News/2455462/
  12. ^ The website address for the US Magnesium Superfund Site is http://www.epa.gov/region8/superfund/ut/usmagnesium/index.html
  13. ^ SORKIN, ANDREW ROSS; DANNY HAKIM (August 10, 2004). "Perelman Seeks Controlling Stake in Maker of Hummer". New York Times (The New York Times Company). Retrieved 2008-05-27. 
  14. ^ Emily Thornton (2003-02-17). "Ira Rennert's House of Debt". Business Week. 
  15. ^ "SEC Inf0: Renco Metals Inc". Sec Info. 2000-06-12. Retrieved 17 December 2008. 
  16. ^ a b c Toxics Release Inventory (TRI) Program
  17. ^ a b c "EPA sues magnesium company". KSL TV. 2005-05-14. 
  18. ^ Nathan Vardi (2002-07-02). "Man with many enemies". Forbes.com. 
  19. ^ "USMag wins favorable fed judge ruling". The Salt Lake Tribune. 2007-10-26. 
  20. ^ a b The Manufacturing Extension Partnership (2006). "2006 MEP Award Winners" (– Scholar search). Retrieved 2008-07-02. [dead link]
  21. ^ "Summaries of the 2004 Climate Protection Award Winner’s Accomplishments". United States Environmental Protection Agency. Retrieved 17 December 2008. 
  22. ^ a b c d Sara Shipley Hiles & Marina Walker Guevara (November–December 2006). "Lead Astray". Mother Jones. 
  23. ^ {url=http://www.waynecojournalbanner.com/reynolds_county/news/article_9bb297c8-6f25-11e3-b5e8-001a4bcf6878.html |title=Herculaneum Facility to Close After 120 Years in Operation}
  24. ^ Craig Cheatham (2005-12-04). "In Peru, a poisoned town, a driven man". Dallas Morning News. 
  25. ^ a b c [url=http://italaw.com/sites/default/files/case-documents/ita0713.pdf]
  26. ^ a b The Nation: "Religious Leaders Challenge Polluter" by Sara Shipley Hiles July 23, 2007
  27. ^ O'Shaughnessy, Hugh (2007-08-12). "Poisoned city fights to save its children". The Guardian (London). Retrieved 2010-05-05. 
  28. ^ a b "#132 Ira Rennert". The World's Billionaries (Forbes.com). 2009-03-11. Retrieved 2009-03-11. 
  29. ^ The world's 50 Richest Jews: 21-30 (jpost.com). 2010-09-07 http://www.jpost.com/JewishWorld/JewishFeatures/Article.aspx?id=187421 |url= missing title (help). Retrieved 2010-09-07. 
  30. ^ a b Yeshiva University News - Gifts Boost Medical Research: Ten Professors Invested in Endowed Chairs at Albert Einstein College of Medicine
  31. ^ Silverstein, Shelly (November 15, 2007). "Rennert's Torahs". Arutz Sheva. Retrieved 2007-11-18. 
  32. ^ Patel, Avni (8 March 2011). "Members of Congress, Obama Administration Go to Bat For Billionaire Investor". ABC News. Retrieved 1 December 2013. 
  33. ^ Vanity Fair: Letter from the Hamptons: Sand Simeon August 1998
  34. ^ Businessweek" Company Overview of Lincoln Center for the Performing Arts, Inc. retrieved May 27, 2012
  35. ^ New York Observer: "Big Deal! Big-Hearted Baron Ira Rennert Buys Daughters Spreads in 740 Park, 778 Park for $60 M.-Plus" By Max Abelson January 23, 2008
  36. ^ New York Observer: "Schwarzman Redux: Manufacturing Exec Signs $18 Million Deal" by Deborah Schoeneman April 17, 2000
  37. ^ New York Times: "At Home in Versailles on the Atlantic" By JULIA C. MEAD July 04, 2004
  38. ^ Jewish Daily Forward: "Feuding Tycoons Attend Same Synagogue" By Michael Kaminer August 6, 2012
  39. ^ Crain's New York: "Battle of the bazillionaires: In a Hummer of a legal fight, Ron Perelman, Ira Rennert trade some nasty accusations" By Aaron Elstein August 5, 2012
  40. ^ "Rennert redux". New York Magazine. 
  41. ^ Rattiner, Dan (2007-03-09). "An apology to Ira Rennert of Sagaponack". Dan's Papers. 
  • Michael Shnayerson. "Devastating Luxury." Vanity Fair. July 2003.
  • James Ridgeway and Jeffrey St. Clair. A Pocket Guide to Environmental Bad Guys, (New York: Thunder's Mouth Press).

External links[edit]