Vital Pieces of Junk Bonds
American businessman, investor and former credit analyst Ira Rennert comes with an estimated net worth of $6.5B. He made his first fortune in junk bonds in the 1980. Using junk bonds to finance his acquisitions of companies, often in bankruptcy, he’s amassed major holdings in fundamental, cyclical businesses including mining and metals such as lead smelters, coal mines, magnesium producers and vehicle assembly lines. He currently commands among the nation’s largest privately held industrial empires and is now considered as one of the richest folks in nyc. His personal home in Sagaponack, New York is also one of the biggest in the USA with 29 bedrooms and 39 bathrooms.
Born Ira Leon Rennert in Brooklyn, ny, he graduated from Brooklyn College and earned his master’s degree from New York University’s Stern School of Business where he’s presently on the Board of Overseers. In 1956, he began his career as a credit analyst on Wall Street. Then he tried to establish his own securities firm in the early 60s but he was found to be in violation of the net capital rule that caused his prohibition from working in securities. After several failed business efforts, he began working for a junk bonds firm, Integrated Resources, Inc. In the late 1980s, several launched his own business, Renco Group, after working for Integrated Resources. The holdings include US Magnesium along with the Doe Run Company, a mining outfit in Peru that is the topic of a long-running pollution suit. He has since grown his business into one of the biggest in the USA.
He purchased steel assets in 2011 from Russia’s OAO Severstal through a new company, RG Steel. After 14 months, RG field for bankruptcy and laid off 4,000 workers while giving business executives $20 million in bonuses. 14’s creditors sued, accusing Rennert of delaying bankruptcy proceedings for personal gain in January 2013. However, the lenders removed the suit a month after. He’s a supporter of Jewish causes.
Using junk bonds to finance his acquisitions of companies, often in insolvency, Rennert has amassed important holdings in fundamental, cyclical businesses, such as mining and metals, including lead smelters, coal mines, magnesium manufacturers and vehicle assembly lines. Now he commands one of the country ‘s largest privately held industrial conglomerates, and his personal fortune is estimated to be $5.9 billion.
Milken—as a bond trader for Drexel Burnham Lambert—was successful selling high-risk, high-yield bonds issued by struggling or undercapitalized businesses. Before Milken, these were considered ‘junk’ and many investors avoided them, but it was Milken’s initiation that formed a strategy of utilizing these junk bonds to supply capital for corporate raiders to conduct hostile business takeovers. As an external board member, Rennert was not dragged down from the fall 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 also to fund the acquisition by issuing junk bonds. Along the way, Rennert paid considerable dividends out of the company to himself. Backed by blue-chip mutual funds and hedge funds for example John Hancock Funds LLC and Putnam Investment Management LLC, Rennert now did not have to invest much of his own money. His purchase of AM General in 1992 was bought with a down payment of only $10 million. In 1997, Doe Run went on to pay $247 million for a likewise environmentally distressed lead smelting complex in the Peruvian authorities, as well as borrowing more cash to service its Fluor debt. And in 1998, Doe Run sold $305 million in junk bonds for financing its Peruvian acquisition in addition to more lead mines in Missouri (according to Doe Run filings together with the SEC). Since 1998 most Renco financings have now been bank debt.