AK Steel Reaches VEBA Settlement with Middletown Retirees
10/09/2007 - AK Steel reaches agreement with a group of Middletown Works retirees to settle a lawsuit stemming from the company's initiatives in 2006 to reduce its retiree health care costs.
AK Steel has reached agreement with a group of retirees from its Middletown Works to settle a lawsuit stemming from the company's initiatives in 2006 to reduce its retiree health care costs.
Under terms of the agreement, AK Steel will transfer all of its health care (OPEB) obligations for the approximately 4600 covered retirees to a Voluntary Employees Beneficiary Association (VEBA) trust, which will be managed solely by the retirees' designees. The VEBA trust will be utilized to fund the retirees' covered benefits.
AK Steel says it will fund an initial trust contribution of $468 million through one or more sources, including its existing cash balances and credit facilities; and possibly the capital markets. The company said it expects the initial trust contribution to occur in the first quarter of 2008.
The company will also make three subsequent annual contributions of $65 million each, for a total of $663 million in funding for the trust. In exchange for this funding, AK Steel will have no further liability related to the Middletown Works retirees covered by the agreement.
As of June 30, 2007, AK Steel's total OPEB liability was approximately $2.1 billion, of which approximately one-half was related to the Middletown Works retirees covered by this settlement.
AK Steel said the agreement is subject to approval by the U.S. District Court, Southern District of Ohio, Western Division, in Cincinnati.
AK Steel produces flat-rolled carbon, stainless and electrical steel products, as well as carbon and stainless tubular steel products, for automotive, appliance, construction and manufacturing markets.
