Stelco convertible holders committee submits restructuring proposal that pays bondholders 100%

By Caroline Salls

Pittsburgh, Dec. 1 - Stelco, Inc.'s informal committee of independent holders of the company's 9.5% convertible debentures due 2007 submitted a proposal for a restructuring plan to the company that would result in Stelco's senior bondholders receiving a 100% recovery on their claims, according to a committee news release.

The committee's proposal includes:

• That the existing convertible noteholders and the standby commitment provider would be entitled to purchase about $172 million of new convertible notes to be issued by Stelco under the plan at 55% of face principal value for cash.

The committee called this a significant premium over the 37.5% offered by Tricap under the proposed Stelco plan. According to the release, a standby commitment would ensure that all $172 million of new convertible notes would be purchased for cash, with the standby commitment provider being entitled to purchase a minimum threshold amount of the new convertible notes;

• All cash generated from the purchase of the new convertible notes would be distributed by Stelco to the senior bondholders, resulting in 100% recovery for the senior bondholders; and

• If the proposal is accepted, material issues that would otherwise be the subject of significant litigation would be resolved without litigation.

The committee said it views Stelco's plan as being inherently unfair to all creditors, and in particular, the existing convertible noteholders.

The committee also said it believes that its proposal more accurately reflects the current and future conditions of the steel industry and Stelco's prospects.

The committee has invited Stelco to enter into negotiations on the proposal, the release said.

Stelco, a Hamilton, Ont.-based steel company, filed for bankruptcy under the Companies Creditors' Arrangement Act on Jan. 29, 2004 in the Ontario Superior Court of Justice.

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