HAMILTON, ON, Dec. 5 /CNW/ - Stelco Inc. (TSX:STE) announced early this
morning that its Board of Directors has approved an amended restructuring plan
for consideration by its creditors. The amended plan has been posted to a link
available on the Company's Web site. It will also be filed with the Court
before this morning's hearing that will consider Stelco's application to
extend the stay period under its restructuring until December 12, 2005.
If the stay period is extended, affected creditors will be asked to
consider and vote on the amended plan at the meetings to be resumed on Friday,
December 9, 2005 or as otherwise ordered by the Court.
Courtney Pratt, Stelco President and Chief Executive Officer, said, "The
Board has approved an amended plan taking into account, among other things,
the interests of the Company and fairness to our stakeholders. We believe the
amended plan addresses those concerns in a fair, reasonable and responsible
manner. While the amended plan contains certain new and positive features,
including significant cash for our creditors, we are not in a position to say
that it is supported by all stakeholders at this time.
"The amended plan is the result of discussions that have taken place
among a number of stakeholder groups in recent days and weeks. Our goal
remains, as it has from the outset, to achieve a plan that will enable Stelco
to emerge a viable and competitive steel producer for the long term. It's time
to bring this matter to a vote."
The amended plan reflects the terms of the stakeholder agreement
announced by Stelco on November 23, 2005 with one major exception. The
proposed amended plan does not include what had been 9% Unsecured Convertible
Notes converting into 25 million common shares of the Company. Those Notes are
replaced by a proposed cash component under which affected creditors will
receive a pro rata share of $137.5 million. The funding for this is to come
from a proposed subscription for common shares from Tricap Management Limited
and other equity investors discussed later in this news release. This
subscription will be made under a plan sponsor agreement to be entered into by
Stelco, Tricap Management Limited and the other subscribers noted below, all
of which are acting independently. This cash component would amount to
approximately 55% of the face value of what had been anticipated to be an
issuance of Unsecured Convertible Notes in the face amount of $250 million.
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.
- $137.5 million in cash that will be provided by the above-noted
equity investors in return for approximately 88% of the equity in
the Company on a fully diluted basis. Of that percentage, 40% will
be underwritten by Tricap Management Limited, 30% by Sunrise
Partners Limited Partnership, and 30% by Appaloosa Management LP.
- 1.1 million new common shares, representing approximately 4% of the
fully diluted common shares of the Company.
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.
Under the proposed plan sponsor agreement, 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
In the next two days the Company plans to post to its Web site an update
on certain matters contained in the information circular ("the Circular")
dated October 5, 2005 that was sent to the Affected Creditors of the
Applicants in connection with their Plan of Arrangement and Reorganization
dated October 3, 2005 to reflect the amended restructuring plan.
The Company indicated that it will refrain from further discussion of
matters surrounding or dealing with this news release or the amended plan
prior to this morning's Court hearing.
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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