Details of latest Stelco plan emerge

Details of latest Stelco plan emerge

Legally insolvent Canadian steelmaker Stelco Inc. has offered its latest plan to leave bankruptcy protection. Stelco filed its plan with the Ontario court overseeing the 18-month restructuring ordeal that has resulted in almost all drama but little tangible results. In its latest bid, the Hamilton steelmaker says it can completely pay off its debt including its pension fund deficit, without requiring any sacrifices from its workers. The plan was detailed on Stelco’s website, highlights of which include:

     Retiring the company's pension plan CA$1.3 billion 
     solvency deficiencies by 2015. Pension plans will
     receive approximately CA$900 million in upfront 
     contributions and annual cash payments before the 
     first new debt instrument matures in 2012.

     Refinancing secured operating lenders at the time 
     of the plan’s implementation.

     Repaying unsecured creditors approximately CA$665         
     million owed to them by conversion of part of their
     obligations to equity and the balance to new debt, 
     some of which will be secured.

     Offering current equity holders less than 2% of the
     fully-diluted shares outstanding, the right to purchase
     shares under a $100 million rights offering, and
     issuing warrants to purchase 10% of the Company on a
     fully-diluted basis.

The announcement went on to say that, upon agreement, the plan would be initiated in two phases:

     Phase One would occur immediately after the company’s 
     exit from bankruptcy would include the issuance to
     creditors of CA$566 million of new debt and CA$100
     million of new equity. This phase will also see the
     payment of contributions to the Company's four main 
     pension plans of CA$100 million in Senior Secured Notes
     and up to CA$100 million in cash from the proceeds of 
     the sale of the non-core assets. 

     Phase Two would follow a pension funding agreement with 
     the Government of Ontario and the conclusion of renewal
     collective bargaining agreements at Lake Erie and
     Hamilton, $200 million of debt will be converted to 
     equity and a $100 million rights offering will be 
     completed. 

Stelco President and Chief Executive Officer Courteney Pratt has said that he believes the plan is reasonable, realistic and responsible and added that he hopes everyone involved can “start working together to secure the approval and implementation of a fair and reasonable plan." If all goes according to plan, Stelco hopes to implement the plan in full by September 30, 2005.