Touchstone Exploration Inc. press release
Stelco files restructuring plan
TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Canada
Company and Province of Ontario agree on pension funding solution Creditors offered new equity and equity-linked securities Company to pursue collective agreements
HAMILTON, ON, Sept. 20 /CNW/ - Stelco Inc. (TSX:STE) today filed a restructuring plan with the Court. It also filed a restructuring agreement with the Province of Ontario that includes an arrangement for the funding of the Company's pension plans. Courtney Pratt, Stelco President and Chief Executive Officer, said, "This plan, together with the restructuring agreement with the Province, represents a significant step forward in our quest for a consensual restructuring and a positive outcome. It provides a strong platform for restructuring the Company. And it moves us closer to the goal of emerging successfully from Court protection as a viable steel producer at Lake Erie and in Hamilton. We're looking forward to constructive discussions with our bondholders and others towards obtaining their support." Mr. Pratt noted that the plan reflects the constructive discussions held with creditors and other stakeholders since the filing of a plan outline on July 15th. "We've listened to the views that have been expressed, we've acted on those concerns, and we've tried to amend the plan outline in accordance with our objective of a fair and reasonable restructuring plan," he noted. "The result is a plan that represents an appropriate balancing of interests." Under the restructuring agreement, the Province will invest $100 million towards an upfront contribution to the Company's pension plans. It has also agreed to a schedule of fixed annual cash payments the Company will make into the plans through 2015. This formula will replace section 5.1 of the Regulation under the Pension Benefits Act. In return, the Province and the Company have agreed that Stelco will increase its proposed upfront contribution to the pension plans to $400 million from the $200 million contained in the Company's July plan outline. The restructuring agreement with the Province is conditional on the conclusion of a funding arrangement with Tricap Management Limited ("Tricap") to provide up to $450 million in new financing and on the Company entering into a Memorandum of Agreement with each of USW Locals 8782 (Lake Erie) and 5220 (AltaSteel) by 9:30 a.m. on Thursday, September 22, 2005 or such later date as the Province, acting reasonably, may agree. To that end, the Company indicated today that it is committed to continuing its efforts to conclude these agreements. "The Province has shown considerable leadership and has broken the restructuring log jam by bringing a tangible pension funding solution to the table," Pratt said. "This solution meets the stated objectives of a number of our stakeholders. It provides stability surrounding our pension funding commitments over the next decade. And it provides security and assurance for our active and retired employees. I want to thank the Province for the constructive role it has played in this process and for the meaningful contribution it is making to the resolution of this matter." The plan will provide Stelco with an estimated $630 million in net liquidity at the plan implementation date of December 31, 2005. And the new capital structure and available liquidity will facilitate pursuit of the Company's four-point strategic plan announced in July 2004.
Highlights of the plan filed today include:
New loans A new $600 million asset-based revolving loan facility. A $350 million revolving bridge facility supplied by a financing provider. The Company is seeking to finalize an agreement with Tricap for this purpose.
New financing Secured Convertible Notes: $225 million. Contingent Convertible 5% Notes: $300 million, convertible into new common shares upon the satisfaction of certain conditions to be determined. Unsecured Subordinated 1% Note: $100 million with a ten-year maturity, issued to the Government of Ontario in exchange for a $100 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.
New equity New common shares: All new common shares will go to the general unsecured creditors subject to the Warrants rights of the Province. Rights: A $75 million rights offering to subscribe to Secured Convertible Notes. The rights offering will be backstopped in exchange for a cash fee and an option to purchase $25 million of new Secured Convertible Notes on the same terms as the rights offering. The Company is negotiating such rights offering and option to purchase with Tricap. Warrants: Warrants, with a seven-year maturity, issued to the Province of Ontario to purchase up to approximately 8.0% of the fully diluted equity at a 100% premium to the trading value of the new common shares.
New cash $155 million in net proceeds from the sale of Stelco non-core assets. $75 million from the planned Rights offering. $25 million from the exercise of the Secured Convertible Note purchase option.
Treatment of stakeholders
Existing secured operating lenders To be repaid in full.
Unsecured creditors: Recovery will take the form of equity and equity- linked securities. The Company indicated today that there is insufficient value to provide full recovery to unsecured creditors under the plan. The actual level of recovery to be realized by unsecured creditors cannot be determined at this time. It is conditional upon a number of complex factors which, themselves, cannot be determined at present. These factors include conditions that must be satisfied under the plan itself, market conditions, and the achievement of collective bargaining agreements to name but three. $225 million in new Secured Convertible Notes. $300 million in new Contingent Convertible Notes. 100% of the equity in a restructured Stelco. Rights to subscribe to $75 million of new Secured Convertible Notes.
Province of Ontario $100 million Unsecured Subordinated Note in exchange for a $100 million cash contribution. Warrants (see: under "New equity" above).
Pension plans An upfront cash contribution of $400 million. Fixed annual cash funding payments of $60 million a year through 2010 and $70 million a year between 2011 and 2015. These payments will not be subject to changes in actuarial assumptions. Additional contributions to be based on a formula driven by the Company's free cash flow. Any solvency deficiency at the end of 2015 will be funded through the normal 5-year pension funding rules.
Employees and retirees Salaried and bargaining unit employees and retirees are unaffected by the plan. No concessions are being sought in terms of salaries and wages, or pension and other benefits. Salaried and bargaining unit employees and retirees will benefit from the pension funding agreement between the Company and the Province.
Existing shareholders The Company indicated today that there is insufficient value to provide recovery to existing shareholders. The existing shares will be effectively cancelled.
Next steps
The materials filed today included the restructuring agreement with the Province and a restructuring plan. A number of motion materials were also filed. The motions seek Orders to, among other things, approve the restructuring agreement, to provide the procedures and timing of a meeting of affected creditors to consider and vote upon the Company's plan, and to extend until December 2, 2005 the stay period that will otherwise expire on September 23, 2005. These matters will be addressed during a Court hearing scheduled for Thursday, September 22, 2005. The full text of the plan will be accessible later today through a link available on the Company's website.
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. %SEDAR: 00001549E