Ira Rennert

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Photograph of Ira Rennert mansion as viewed from above

Ira Leon Rennert (born 1934, Brooklyn, New York) is a controversial American billionaire investor and businessman. He has built up his wealth by using junk bonds to secure companies, often in bankruptcy sales, in basic, cyclical industries like mining and metals. Over the years he has amassed holdings in lead smelters, coal mines, magnesium producers and vehicle assembly lines.[1] During the 1990s he sold approximately $1.5 billion in high-yielding junk bonds to create one of the nation’s largest privately held industrial empires, and his personal fortune is estimated to be $4 billion.[2]

Rennert's home, called Fair Field, is in Sagaponack, Southampton, the Hamptons and cost an estimated $100 million to build.[1] The 100,000 square feet house has 29 bedrooms, 2 bowling alleys, 39 bathrooms, parking for 200 cars and is on a 68 acre beachfront lot. Its construction angered Rennert’s neighbours and inspired James Brady’s 1999 novel, The House that Ate the Hamptons.[3] Rennert and his wife also own a duplex apartment on Manhattan’s Park Avenue, a home in Israel, and a Gulfstream V Jet.

Contents

[edit] Background and education

Rennert is of Jewish heritage. He is a graduate of Brooklyn College. He earned his master's degree from New York University's Stern School of Business, where he is currently on the Board of Overseers.[4]

[edit] Renco Group and the junk bond king

With its offices in the Rockefeller Center, Renco Group, of which Rennert is both President and CEO, ranked 89th in the Forbes’ list of America’s biggest held private companies, with an estimated annual revenue of $2.15 billion.[5] Rennert’s holding company acquired military contractor AM General in 1992 for $133 million, later selling a majority stake to Ron Perelman’s MacAndrews & Forbes holding company for $930 million in 2004.[6] Other subsidiaries of Renco include: Renco Steel, Baron Drawn Steel, Doe Run – the world’s second largest lead smelter, Unarco Material Handling, and US Magnesium.

Renco Group lost control of WCI Steel (now Serverstal Warren) when the company emerged from Chapter 11 bankruptcy protection in 2006. In February 2008, Renco Group acquired Delphi's interiors and closures business which has been renamed Inteva Products, LLC.[7]

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.[5]

[edit] Career

[edit] Selling stock

Rennert started his career as a credit analyst on Wall Street in 1956. He also served briefly as a salesman for a typewriting company and a stock brokerage, 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 censored by the NASD for operating without enough capital. This occurred again in 1963 and his licence was revoked on November 29, 1964 and he was effectively banned from the securities industry. According to Rennert, he shut his firm voluntarily and his NASD licence was revoked purely as a routine matter. 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."[8]

[edit] Private Equity

Rennert was a consultant for the next eleven years (Who’s Who entry) and entered the private equity market, unregulated by the NASD or the SEC. 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 following decades he also joined the board of Integrated Resources Inc, a company connected with Michael Milken.

[edit] High Yield Junk Bonds

Milken – as a bond trader for Drexel Burnham Lambert Group Inc. - was successful selling high-risk, high-yield bonds issued by struggling or under-capitalized 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. With $2 billion in junk bonds financed by Milken, Integrated Resources’ stock shot up and its directors paid themselves substantial salaries (c.f. the 1991 book Den of Thieves about the junk bond scandal). However, the whole junk bond industry eventually collapsed, Integrated Resources defaulted on $1 billion in bond debt in May 1989 and it finally filed for bankruptcy.

During Integrated Resources’ boom time in the 1980s, Rennert was pursuing his own private strategy of acquiring struggling companies and issuing junk bonds. He sold millions in bonds to private investors in order to use the borrowed capital to establish a portfolio of private industrial companies in his holding company, Renco, which owned nearly all the shares, becoming one of Wall Street’s principal buyers of companies shunned by other purchasers.

[edit] WCI Steel and its Pension Plan

His 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 turn it around using $250 million in junk bonds. Now, rather than using junk bonds for acquiring companies, Renco’s subsidiaries issued bonds after being acquired, using the proceeds to fund their individual operations and to pay Renco (and indirectly Rennert) large dividends and fees. For example, WCI sold bonds totalling $300 millon and paid $108 million of the proceeds as a dividend to Renco based on WCI files with the SEC.[5] 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 $100 million 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, the due date on WCI Steel’s $300 million of notes came about and by the autumn the company was declared bankrupt. The steel workers’ pension scheme was owed $282 million but the company only had $93 million in assets, thus producing a $189 million shortfall. 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, with the non pension assets being transferred, and the ailing pension plan left was the empty shell of the old, bankrupt WCI Steel.[1] Newspaper reports at the time stated that the Pension Benefit Guaranty Corporation was threatening to put a lien on Rennert’s personal estate in order to ensure the steelworkers’ benefits (since, when a pension plan defaults, the agency has the power to chase the assets of any companies that are more than 80% controlled by the same corporate parent).[9]

In 1989, Renco acquired the US’ 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'.[5] Eight months after the government’s filing of the suit, Renco Metals Inc. filed for bankruptcy protection in New York.

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). The company also made promises to spend $148 million to curb pollution and modernise its La Oroya smelter by the end of 2006.

With the Gulf War in the offing boosting demand for Humvees, Rennert was well-placed with AM General at a time, however, when his other companies began to stutter. In November 2000, Lodestar Holdings, his coal company, defaulted on an $8.6 million bond payment and was forced into bankruptcy four months later.

[edit] House

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 America.[10][11] 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.[12] Rennert named his home after the adjoining body of water, Fairfield Pond. The house faces the Atlantic Ocean and its grounds measure 63 acres. 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.[11] Its property taxes in 2007 were $397,559.00. Based on these taxes, the home is currently valued at $185 million[13] making it the most valuable home in the Hamptons.[citation needed]

[edit] Environmental concerns

Rennert was awarded the The Awful Truth Man of Year Award in 1999 by filmmaker Michael Moore, based on a 1996 EPA Report which lists Magnesium Corp Of America as the top single polluting industrial facility in the United States and a second EPA report from the same year which lists Renco Group Inc. as the top most polluting parent company (based on total on-site and off-site releases). However, as described below, Rennert's companies have all made significant environmental improvements since being acquired by Rennert and Renco and the particular emissions highlighted by Moore have since been reduced by more than 95%.[14]. But researchers are challenging these claims by contending that Doe Run Peru has misled officials by using 1997, the year it took control of the smelter, as a point of comparison for pollution levels, since contamination climbed that year, and that Doe Run Peru has overseen an absolute increase in contamination in La Oroya.

[edit] United States

For more detailed information, go to Doe Run Company.

The Renco Group's environmental record has been mixed. 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).[15] (US Magnesium was purchased by Renco in 1989 in the year in which its emissions peaked at 119,000 tons per year.)[16] By 1998, the year the Renco was placed on the EPA list, Renco had reduced emissions at US Magnesium by 50%.[14] By 2005, the most recent year of data released by the EPA, emissions had been reduced by 97%.[14]

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).[14] 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]

[edit] Peru

For more detailed information, go to Doe Run Company.

Doe Run, Peru, (a Renco Group holding) operates a smelting plant in La Oroya, Peru, that has similar types of environmental challenges to those faced in Herculaneum, but on a larger scale.[23] The La Oroya smelter began operations in 1922 and was operated for many years by the Peruvian government until it was sold to Doe Run in 1997. The site was substantially contaminated at the time it was purchased by Doe Run, and as part of the purchase agreement Doe Run agreed to remediate certain environmental issues. Although the company has spent more than $107 million improving the pollution and has reduced air pollution by 25 percent and water pollution by 90 percent, La Oroya is still an evironmental blight.[24]

The Blacksmith Institute has placed La Oroya on its list of ten most polluted places in the world, along with Chernobyl, Ukraine.[24] 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. Water levels of lead exceeded the "safe" lead level (as established by the World Health Organisation) as well.[25] 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.[24]

Despite the pollution, the local mayor and union leaders have historically supported Doe Run even when the Peru government pressured the company to further reduce emissions.[25] The local population elected a new mayor and new union leaders who have pushed for additional progress including a release of an early 2007 audit of Doe Run conducted by two auditing firms chosen and appointed by Peru's Ministry of Energy and Mines to verify Doe Run Peru's compliance with its environmental operating agreement with the government and an "alert program" implemented by Doe Run in agreement with the Peru government which consists of three levels (watch, danger and emergency); at each level, certain actions are taken which reduce the exposure to pollution and partially halt production lines for lead and copper.[26] Approved July 18, 2007, the alert program consists of three levels (watch, danger and emergency); at each level, certain actions are taken which reduce the exposure to pollution and partially halt production lines for lead and copper. On the day the "alert program" was approved, the level of sulphur dioxide recorded over the course of three hours was 12,000 micrograms of sulphur dioxide per cubic metre of air, when the air quality standard only allows 364 micrograms. Carlos Rojas, regional coordinator of the government's national environmental council (CONAM) has stated that none of the three levels entails ceasing operations at the smelting plant.[26]

The audit was released in November 2007 and reported that air quality samples taken during the audit earlier this year met the monthly Air Quality Standards (AQS), while main stack emissions were below the maximum limits allowed by the law. Additionally the auditor's report showed that there is no variation in the quality of receptor bodies in the Mantaro River. The audit took place January 4-14, 2007 and was monitored by outside observers.[27] However, as noted above, the air quality standards were violated on July 18, 2007, the day the alert program was approved. Furthermore, a report from August 6, 2007[28] states that "If the contingency [alert] plan were already in place, a state of emergency would have been declared 183 days so far this year," suggesting that the air quality samples taken during the audit do not reflect air quality during most of the year.

[edit] Philanthropy

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 School of Medicine, a Chair in Stem Cell Biology at Albert Einstein College School of Medicine, and the Ira Rennert Professorship of Business at Columbia University.[29][29] 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). They also donated about 160 Torah scrolls to communities in Israel.[30]

[edit] Wealth

Ira Rennert ranks #132 on Forbes Magazine's list of World Billionaires.[13]

[edit] Family

Ira Rennert and his wife, Ingeborg, have three children[2] and are grandparents.

[edit] References

  1. ^ a b c "Pension Battle May Entangle Mogul's Home". New York Times. 2006-02-03. http://www.nytimes.com/2006/02/03/business/03pension.html. Retrieved on 17 December 2008. 
  2. ^ a b "No. 132, Ira L Rennert". Forbes.com. . http://www.forbes.com/lists/2009/10/billionaires-2009-richest-people_Ira-Rennert_M9N4.html. Retrieved on 25 June 2009. 
  3. ^ Barstow, David (1999-06-19). "Still Chic? The Hamptons Feud and Fret, but Keep On Beckoning". New York Times. http://query.nytimes.com/gst/fullpage.html?res=9801E1DC1330F932A35755C0A96F958260&sec=&spon=&pagewanted=all. Retrieved on 17 December 2008. 
  4. ^ "The Board of Overseers". New York University Leonard N. Stern School of Business. http://w4.stern.nyu.edu/aboutstern/aboutstern.cfm?doc_id=1881. Retrieved on 2007-08-01. 
  5. ^ a b c d "Doe Run owner built empire on junk bonds". St. Louis Post-Dispatch on Sunday. 14 April 2002. http://www.leadprevention.org/web/uploads//Doe%20Run%20owner%20built%20empire%20on%. Retrieved on 17 December 2008. 
  6. ^ New York Times, August 10, 2004, "Perelman Seeks Controlling Stake in Maker of Hummer"
  7. ^ New era begins at plant | GadsdenTimes.com | Gadsden Times | Gadsden, AL
  8. ^ 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. http://www.businessweek.com/magazine/content/03_07/b3820069_mz020.htm. Retrieved on 17 December 2008. 
  9. ^ Walsh, Mary Williams (2006-02-04). "U.S. Moves to Seize Bankrupt Steel Maker's Pension Plan". New York Times. http://www.nytimes.com/2006/02/04/business/04pension.html?ex=1139720400&en=e375f131a471cd33&ei=5040&partner=MOREOVERNEWS. Retrieved on 17 December 2008. 
  10. ^ Peter Hellman. "Rennert redux". New York Magazine. http://nymag.com/nymetro/realestate/features/1718/. 
  11. ^ a b Gross, Jane (1998-08-23). "Millionaire's Mega-Mansion Shocks Even the Hamptons". New York Times. http://query.nytimes.com/gst/fullpage.html?res=9A02E0DF1F3DF930A1575BC0A96E958260. Retrieved on 2008-07-02. 
  12. ^ Dan Rattiner (2007-03-09). "An apology to Ira Rennert of Sagaponack". Dan's Papers. http://www.danspapers.com/issue48_2007/5.html. 
  13. ^ a b "#132 Ira Rennert". The World's Billionaries. Forbes.com. http://www.forbes.com/lists/2009/10/billionaires-2009-richest-people_Ira-Rennert_M9N4.html. Retrieved on 2009-03-11. 
  14. ^ a b c d Toxics Release Inventory (TRI) Program
  15. ^ Emily Thornton (2003-02-17). "Ira Rennert's House of Debt". Business Week. http://www.businessweek.com/magazine/content/03_07/b3820069_mz020.htm. 
  16. ^ "SEC Inf0: Renco Metals Inc". 2000-06-12. Sec Info. http://www.secinfo.com/dRqWm.5RYu.htm. Retrieved on 17 December 2008. 
  17. ^ a b c "EPA sues magnesium company". KSL TV. 2005-05-14. http://tv.ksl.com/index.php?nid=5&sid=205094. 
  18. ^ Nathan Vardi (2002-07-02). "Man with many enemies". Forbes.com. http://www.forbes.com/forbes/2002/0722/044_print.html. 
  19. ^ "USMag wins favorable fed judge ruling". The Salt Lake Tribune. 2007-10-26. http://www.sltrib.com/news/ci_7288544. 
  20. ^ a b The Manufacturing Extension Partnership (2006) ([dead link] – Scholar search), 2006 MEP Award Winners, http://www.mep.org/textfiles/2006%20MEP%20Award%20Winners.pdf, retrieved on 2008-07-02 
  21. ^ "Summaries of the 2004 Climate Protection Award Winner’s Accomplishments". United States Environmental Protection Agency. http://www.epa.gov/cppd/awards/winners_summaries4-20-04.doc. Retrieved on 17 December 2008. 
  22. ^ a b c d Sara Shipley Hiles & Marina Walker Guevara (November/December 2006). "Lead Astray". Mother Jones. http://www.motherjones.com/news/feature/2006/11/lead_astray.html. 
  23. ^ Craig Cheatham (2005-12-04). "In Peru, a poisoned town, a driven man". Dallas Morning News. http://www.dallasnews.com/sharedcontent/dws/news/world/stories/120505dnintperumission.7cfb9ab.html. 
  24. ^ a b c Sara Shipley Hiles (2007-07-23). "Religious Leaders Challenge Polluter". The Nation. http://www.thenation.com/doc/20070709/hiles. 
  25. ^ a b Poisoned city fights to save its children | World |The Observer
  26. ^ a b PERU: Pollution Emergency Plan Instead of Real Action for La Oroya
  27. ^ "Independent Audits Confirm that Doe Run Peru Meets Emissions Standards"
  28. ^ Tierramérica
  29. ^ a b Yeshiva University News - Gifts Boost Medical Research: Ten Professors Invested in Endowed Chairs at Albert Einstein College of Medicine
  30. ^ Silverstein, Shelly (November 15, 2007). "Rennert's Torahs". Arutz Sheva. http://www.israelnationalnews.com/News/News.aspx/124270. Retrieved on 2007-11-18. 
  • 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.

[edit] External links

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