Stelco seeks to extend bankruptcy protection, renegotiates Deutsche Bank financing

By Jeff Pines

Washington, Nov. 24 - Stelco Inc. wants to extend its bankruptcy protection under the Companies' Creditors Arrangement Act to Feb. 11, the company's court-appointed monitor said in a report.

Protection for the bankrupt Canadian steel producer is scheduled to end Nov. 26 without an extension. Ernst & Young Inc., the monitor, said Stelco needs the extension to work out a reorganization plan and complete the sale of its non-core assets.

As of Nov. 18, Stelco has confidentiality agreements with 34 prospective buyers for AltaSteel, 31 for Norambar, 24 for Stelcam, 32 for Stelwire, 30 for Stelfil and 32 for Stelpipe.

In related news, the company said it had renegotiated a proposed C$900 million in financing with Deutsche Bank. Originally, the financing was contingent on Stelco securing a contract to supply General Motors with steel without any labor problems. It remains unclear whether management or the union is responsible for the lack of an agreement which led to a loss of the GM contract since each has blamed the other.

The new financing requires certain assurances for several other large contracts and the removal of a provision for a management stock plan.

According to the term sheet, Stelco will get a C$500 million syndicated asset-based loan facility underwritten by Deutsche Bank AG and CIT Business Credit Canada. The company would have access to C$300 million immediately after it emerges from the court-supervised restructuring.

Deutsche Bank would buy C$300 million of seven-year 7% second priority senior secured convertible debentures. The notes would be convertible into 47.6% of the Stelco's new equity on a fully diluted basis. After 24 months the company can require conversion of the debentures if the closing price of the common stock exceeds 175% of the conversion price for at least 20 consecutive trading days.

The bank also would buy up to C$100 million of 12-month 9% second priority senior secured notes as bridge financing.

"This shows how supportive the bank and other bondholders are for an exit from CCAA for the company. They obviously believe our exit is possible and should be supported," said Courtney Pratt, president and chief executive officer of Stelco.

Stelco will be seeking approval of the revised Deutsche Bank commitment letters on Nov. 25, the company said.

Stelco filed for protection under Canada's Companies Creditors Arrangement Act on Jan. 29, 2004.

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