Stelco creditors fully subscribe to stock

New York, Jan. 27 - Stelco Inc. said the 5.624 million shares on offer were fully subscribed to by creditors.

Creditors will receive 33.1% of the shares they chose to receive.

Under Stelco's restructuring plan unsecured creditors will receive 1.1 million new common shares and had the right to receive up to an additional 5.624 million new common shares in lieu of C$5.50 per share out of the cash pool.

Stelco's plan, its second amended, had a cash pool for unsecured creditors of C$108.55 million to C$137.5 million.

Tricap Management Ltd., Sunrise Partners LP and Appaloosa Management LP have commited to purchase a total of 19.376 million new common shares, funding C$108.55 million of the cash pool.

In addition, creditors will receive warrants to buy 1.42 million shares, or 5% of the fully diluted equity. The warrants are exercisable at C$11.00 per share.

Also under the plan:

• Stelco will receive a C$600 million asset-based revolving loan facility;

• Stelco will obtain a C$375 million revolving bridge facility being negotiated with Tricap;

• Stelco will issue a C$150 million unsecured subordinated 1% note to the Province of Ontario in exchange for a C$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, will be issued to the Province of Ontario to purchase up to 3% of the fully diluted equity (or 0.85 million new common shares) at an exercise price of C$11.00 per new common share. (This distribution was reduced from 8% or 2.3 million shares.)

• Existing secured operating lenders will be repaid in full;

• Unsecured creditors will receive a share of C$275 million in secured floating-rate notes with interest of Libor plus 500 basis points if paid in cash or Libor plus 800 basis points if paid in kind at the company's option and a 10-year term, payable in cash on maturity;

• Unsecured creditors will also receive a share of a cash pool consisting of a minimum of C$108.55 million and a maximum of C$137.5 million;

• The Stelco Pension Plans will receive an upfront cash contribution of C$400 million and fixed annual cash funding payments of C$65 million each year between 2006 and 2010 and C$70 million each year between 2011 and 2015.

There may be increased payments through annual cash sweep payments, beginning in 2007, based on cash flow and liquidity tests. Any solvency deficiency at the end of 2015 will be funded through the normal five-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.

• Existing shares will be canceled.

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 for Justice.

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