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WCI Steel says will need extra financing if volume, price increases not sustained
New York, March 18 - WCI Steel, Inc. will need extra financing unless expected price and volume increases are achieved in the second and third quarters of 2002 and sustained for the fourth fiscal quarter, the company's parent Renco Steel Holdings, Inc. said in a filing with the Securities and Exchange Commission Monday.
Should more financing be necessary, WCI cannot give an assurance that it will be able to obtain the extra money, the company added.
"Failure to obtain additional financing in these circumstances would likely have a material adverse effect on WCI's operations," the SEC filing said.
Beyond fiscal 2002, further price improvements will be necessary for WCI to have sufficient cash resources to maintain its operations, the company continued.
The SEC filing also noted that Renco Steel did not make the interest payment due Feb. 1, 2002 on its $120 million 10 7/8% senior secured notes maturing 2005 until Feb. 28, still within the grace period. Funding for the coupon was provided by a $3.4 million loan from The Renco Group, Inc., the parent of Renco Steel.
Renco Group, which owns $59.32 million of Renco Steel's notes and is seeking to buy more, waived its right to receive the interest payment.
The SEC filing added that Renco Steel will be "completely dependent" on contributions from Renco Group to make future interest payments because significant losses at WCI for the last five quarters mean WCI does not expect to pay dividends to Renco Steel in the foreseeable future. WCI's ability to pay dividends is restricted by the indentures of its 10% senior secured notes due 2004.
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