HAMILTON, ON, Dec. 8 /CNW/ - Stelco Inc. (TSX:STE) announced late this
afternoon that its Board of Directors has approved a second amended
restructuring plan ("the second amended plan") for consideration by its
creditors. The second amended plan will be posted to a link available on the
Company's Web site. It will also be filed with the Court before the previously
adjourned meetings of affected creditors resume on Friday, December 9, 2005.
Courtney Pratt, Stelco President and Chief Executive Officer, said, "The
Board has approved this second amended plan in response to concerns raised by
bondholder representatives about the amended plan we announced on December 5,
2005. Specifically, the second amended plan provides an opportunity for equity
participation by the unsecured creditors and makes that opportunity optional.
We believe that this adjustment, together with the other elements of the
second amended plan - which are identical to those in the plan of December 5,
2005 - address the interests of our stakeholders in a fair and responsible
way.
"While the Board has approved the second amended plan, under a previous
Court order the document can be amended up to and during the meetings of
affected creditors that will take place tomorrow morning. The Company strongly
encourages all affected creditors to attend the meetings so they know the
exact details of the plan on which they'll be asked to vote."
The substantive change from the amended plan announced on December 5,
2005 concerns the recovery to unsecured creditors. They will continue to
receive a pro rata share of Secured Floating Rate Notes. The cash pool, which
had been $137.5 million, will now range from a minimum of $106,562,500 to a
maximum of $137.5 million. And in addition to their share of 1.1 million new
common shares, affected creditors may elect to receive up to an additional
5.625 million new common shares. Tricap Management Limited ("Tricap"), Sunrise
Partners Limited Partnership ("Sunrise") and Appaloosa Management LP
("Appaloosa") will commit to purchase a total of 19.375 million new common
shares, funding $106,562,500 of the cash pool. If affected creditors elect to
take cash in lieu of exercising the option to acquire their portion of the
5.625 million additional new common shares, Sunrise and Appaloosa will acquire
such shares, providing up to an additional $30.9375 million to the cash pool.
Further details are provided later in this news release.
The amended plan 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 (or approximately 2.3 million new common shares) at an
exercise price of $11.00 per new common share.
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.
- A cash pool consisting of a minimum of $106,562,500 and a maximum
of $137.5 million.
- 1.1 million new common shares with a right to receive up to an
additional 5.625 million new common shares ("the additional
shares") in lieu of $5.50 per share out of the cash pool.
The cash pool would be funded as follows. Tricap would commit to purchase
9.375 million new common shares at $5.50 per share, funding the cash pool in
the amount of $51.5625 million. Sunrise and Appaloosa would each commit to
purchase 5 million new common shares at the same price, for a total of 10
million new common shares, funding the cash pool in the amount of $55 million.
Sunrise and Appaloosa would also acquire, on a 50/50 basis, any of the
additional shares not purchased by affected creditors by an agreed date, at a
price of $5.50 per share. This could fund the cash pool up to an additional
$30.9375 million.
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 size of Stelco's Board of Directors will be fixed at nine members.
Tricap Management Limited will have the right to name four of the directors.
The other capital providers subscribing for common shares will have the right
to nominate one each. The remaining directors will be chosen through a
consultative process.
Board nominees will be elected on the basis of cumulative voting. This
means that shareholders may allocate the total number of votes they're
entitled to cast in any way they wish, i.e. all for one nominee, among several
nominees, or divided among all nominees.
The plan sponsor agreement requires plan implementation to occur not
later than March 31, 2006. Subject to creditors approving and the Court
sanctioning the plan, Stelco expects to implement the plan early in 2006 and,
if possible, before March 31, 2006.
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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