HAMILTON, ON, Nov. 23 /CNW/ - Stelco Inc. (TSX:STE) announced this
evening that a consensual agreement on the economic terms of a restructuring
plan has been achieved among key stakeholders.
The stakeholder agreement has the support of four key stakeholder groups -
representatives of the Company's bondholders, the Province of Ontario, Tricap
Management Limited and the United Steelworkers. The Company's management and
the Chief Restructuring Officer participated in these negotiations. Given the
speed at which events moved during the course of today, the Company's Board of
Directors has not yet had the opportunity to consider the proposal in detail;
it is expected to do so by Monday. Should the Board approve the proposed
economic terms, it would expect to file an amended plan promptly.
At the meetings of creditors held this evening, and at the request of the
Company, the Court-appointed Monitor adjourned the meetings until Friday,
December 2, 2005 so that affected creditors may receive and consider the
amended plan. In addition, the Honourable Mr. Justice Farley has been given
sufficient assurances concerning the agreement by counsel for the key
stakeholders that he has determined that he need not return from vacation to
hear motions for alternative relief tentatively scheduled for Friday,
November 25, 2005.
Courtney Pratt, Stelco President and Chief Executive Officer, said,
"Achieving consensus among these stakeholder groups is a positive step toward
allowing Stelco to emerge as a viable and competitive steel producer for the
long term. This proposal will now be presented to, and fully considered by,
Stelco's Board of Directors, based on, among other things, the interests of
the Corporation and fairness to the Corporation's stakeholders. I want to
thank everyone concerned for the effort and dedication that have brought us to
this stage."
"I want to acknowledge the increased participation of the Province of
Ontario and the support we received from the Government of Canada today," Mr.
Pratt noted. "This presence is extremely important and sends a strong signal
of support to the entire Stelco community."
The stakeholder agreement is based on:
- The availability of a $600 million asset-based revolving loan
facility.
- The availability of a $375 million revolving bridge facility being
negotiated with Tricap Management Limited.
- A $150 million Unsecured Subordinated 1% Note, issued to the
Province of Ontario in exchange for a $150 million cash
contribution. If the pension solvency deficiency is fully funded
by year 10, then 75% of the Note would be forgiven at maturity,
with the balance payable in cash or shares.
- Warrants, with a seven-year maturity, issued to the Province of
Ontario to purchase up to approximately 8% of the fully diluted
equity.
Existing secured operating lenders will be repaid in full.
Unsecured creditors will receive a pro rata share of:
- Secured Floating Rate Notes: $275 million; interest of LIBOR
(London Interbank Offering Rate) plus 500 basis points if paid in
cash or LIBOR plus 800 basis points if paid in Secured Floating
Rate Notes at the Company's option; 10-year term, payable in cash
on maturity.
- Unsecured Convertible Notes: $250 million bearing interest of 9%;
will automatically convert into equity at $10 per new common share
18 months after plan implementation or if less than $75 million in
notes remain outstanding; Tricap Management Limited will provide a
liquidity facility to allow holders to exchange up to $125 million
of the Unsecured Convertible Notes for cash equal to 37.5% of face
value on closing, which, if taken advantage of, will result in
Tricap acquiring the right to a significant proportion of the
Corporation's common shares.
- 100% of the initial equity, represented by 1.1 million new common
shares.
The Stelco Pension Plans will receive:
- An upfront cash contribution of $400 million.
- Fixed annual cash funding payments of $65 million each year
between 2006-2010 and $70 million each year between 2011-2015.
- There may be increased payments through annual cash sweep
payments, commencing in 2007, based on cash flow and liquidity
tests.
- Any solvency deficiency at the end of 2015 will be funded through
the normal 5-year pension funding rules.
A six-month grace period on cash funding payments will be provided during
the first half of 2006, increasing Stelco's liquidity on emerging from Court
protection.
The existing shares will be effectively cancelled. As the Company has
stated for some time, there is insufficient value to provide full recovery to
unsecured creditors. Factors affecting the Company, its value and the recovery
for unsecured creditors include volatile steel prices, reduced production and
shipments, and increased costs.
The Board will examine the structural and related legal issues that need
to be looked at and dealt with in order to implement this agreement. If this
agreement is adopted in a plan approved by Stelco's Board of Directors,
details will be accessible through a link available on the Company's Web site.
It is anticipated that an amended plan will be filed early next week.
The information circular dated October 5, 2005 (the "Circular") sent to
the Affected Creditors of the Applicants in connection with their Plan of
Arrangement and Reorganization dated October 3, 2005 contains information
known to the Applicants at that date. Over the last six weeks the bases for
some of the information in the Circular have changed. Some of the changes are
reflected in the Third Quarter 2005 Report to Shareholders released by Stelco
on November 10, 2005.
Among other things, steel company value and Stelco's prospects have
deteriorated, which will negatively affect creditor recoveries. The plan
contemplated by the stakeholder agreement may offset the negative impact of
these events. In these circumstances, it would not be appropriate to rely on
the financial information in the Circular relating to, among other things, pro
forma financial results and illustrated creditor recoveries pending an update
to the Circular.
About Stelco
Stelco Inc. is a large, diversified steel producer. Stelco is involved in
major segments of the steel industry through its integrated steel business,
mini-mills, and manufactured products businesses.
This news release may contain forward-looking information with respect to
the Corporation's business operations, financial performance and conditions.
Actual results may differ from expected results for a variety of reasons
including factors discussed in the Corporation's Management's Discussion and
Analysis section of the Corporation's 2004 Annual Report. To learn more about
Stelco and its businesses, please refer to our Web site at www.stelco.ca.
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