Touchstone Exploration Inc. press release
Stelco announces agreement on a restructuring plan
TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Canada
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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