Island Energy Partnership asks to submit offer to recapitalize Stelco

By Caroline Salls

Pittsburgh, May 3 - Island Energy Partnership asked the Ontario Superior Court of Justice to allow it to submit an offer to recapitalize Stelco Inc.

Island Energy, a partnership between Sherritt International Corp. and Ontario Teachers' Pension Plan Board, said Monday that its offer is better than a previous proposal from Tricap Management Ltd. with the backing of the United Steelworkers of America. Island also said that its offer better protects the interests of Stelco and its stakeholders.

Island Energy added that confidentiality provisions keep it from providing details of the offer.

Island Energy said Monday "the terms of the Tricap proposal would likely not result in Stelco exiting from this CCAA proceeding as a competitively viable business in the North American steel industry.

"Permitting the Tricap proposal to proceed without providing [Island Energy] with the opportunity to submit an offer would be unfair to IEP, which expended significant resources to participate in the capital raising process."

On April 13, The United Steelworkers of America said it signed a letter of intent with Tricap to work together on a C$1.35 billion plan to recapitalize Stelco.

Under its agreement, Tricap, Brascan Corp.'s restructuring fund, will provide advisory services and, as required, financial assistance to the union in the development, negotiation and implementation of a plan of arrangement that is acceptable to the union and brings Stelco out of protection under the Companies' Creditors Arrangement Act.

Tricap has committed to arrange or provide C$1.35 billion of new capital including a C$600 million revolving line of credit, a C$350 million term loan and an underwriting commitment to backstop C$400 million of equity-linked securities to be offered to existing stakeholders.

Of the proceeds, C$500 million will be immediately contributed to Stelco's pension plans, C$100 million will be used to repay Stelco's existing secured debt and C$750 million will be retained to fund capital expenditures and for general corporate purposes.

Current unsecured creditors will receive new equity in the reorganized company under Tricap's plan.

Stelco, a Hamilton, Ont., steelmaker, filed for bankruptcy on Jan. 29, 2004.

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