Touchstone Exploration Inc. press release
Stelco to file amended restructuring plan
TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Canada
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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