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Court Approves Deutsche Bank Proposal as Stalking Horse Bid

11/30/2004 - The Superior Court of Justice (Ontario) has approved the Deutsche Bank commitment as the stalking horse in Stelco Inc.’s capital raising process. The Court also approved amendments to the process itself that were proposed by the company.

The Superior Court of Justice (Ontario) has approved the Deutsche Bank commitment as the stalking horse in Stelco Inc.’s capital raising process. The Court also approved amendments to the process itself that were proposed by the company.

Stelco received an amended expression of interest from GMP Securities Inc. late last Friday, Nov. 28. In the proposal, GMP and GE Canada Finance Inc. proposed to serve as the stalking horse in the company's capital raising process. The proposal also included an increase in the total face amount of the financing package from $1.050 billion to $1.1 billion, and adjustments to the convertible debentures to be purchased on a bought-deal basis.

Following a thorough review, and with input from its advisors, Stelco’s Board unanimously concluded that, while the GMP expressions of interest have contained several positive features, including some equity value for existing shareholders, the amended expression of interest is highly conditional as GMP and GE have not undertaken any significant due diligence at this point. This means that it could take some weeks for all the underlying financial commitments to become firm. The Board concluded that the Deutsche Bank commitment should remain the preferred opening bid against which other proposals would be evaluated subject to Court approval of the approach proposed by the company.

Based on the conditional nature of the GMP/GE proposal, Stelco’s Court-appointed Monitor also expressed the view that the Deutsche Bank commitment is a more appropriate stalking horse bid. The Monitor’s opinion was made on the grounds that its terms and timing are clear and because Deutsche Bank will complete its due diligence within the next several days. Details are available in the Thirteenth Report of the Monitor.

The Court noted that the Deutsche Bank proposal had been reviewed and recommended by a number of parties including Stelco’s Board, its independent Board Restructuring Committee, management, bondholders plus the Court-appointed Monitor, Chief Restructuring Officer and UBS.

The Court also dismissed the motion of Pollitt & Co. calling for a valuation of the company, a meeting of shareholders and rescinding of the Initial Order under which Stelco was granted protection in January.

Courtney Pratt, Stelco's President and CEO, said, "We welcome these decisions and believe they will benefit all of our stakeholders. We now have an opening bid that will serve as a benchmark against which other offers can be evaluated in an open, vigorous and competitive process. The Deutsche Bank commitment will stand or fall on its own merit. We're not making any foregone conclusions or assumptions about the outcome of this process.

"We also note the Court's opinion that the Deutsche Bank commitment, and other expressions of interest, should take into consideration the interests of the company's retirees and the pension deficit. Like the Court, we hope and expect that the proposals we receive and the bid that is eventually approved will serve the interests of the company and all stakeholders."

Late last week, the Superior Court of Justice (Ontario) extended Stelco’s stay period under its Court-supervised restructuring until February 11, 2005. This will provide certainty for the company and enable it to continue negotiations with various stakeholders as part of the restructuring process.

Stelco Inc. is a large, diversified steel producer involved in major segments of the steel industry through its integrated steel business, minimills, and manufactured products businesses.