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Steelworkers Preparing Plan to Save Stelco

04/14/2005 - The United Steelworkers of America has signed a letter of intent with Tricap Management Limited (Brascan Corp.'s restructuring fund) to work together on a C$1.35 billion plan to recapitalize Stelco Inc., and remove the company from protection under the Companies' Creditors Arrangement Act (CCAA).

The United Steelworkers of America has signed a letter of intent with Tricap Management Limited (Brascan Corp.'s restructuring fund) to work together on a C$1.35 billion plan to recapitalize Stelco Inc., and remove the company from protection under the Companies' Creditors Arrangement Act (CCAA).

Stelco’s Response

Stelco Inc., which was not a party to the letter of intent, noted that although Tricap was invited to participate in the Court-approved capital raising process run earlier this year, the company declined to so.

Stelco is now pursuing a Court-approved stand-alone process to raise capital that would allow it to emerge from CCAA protection. The Stelco-driven process will seek to address all stakeholders concerns.

Hap Stephen, Stelco's Chief Restructuring Officer, said, "We all want to see Stelco emerge from its restructuring as successfully and as quickly as possible. That can only be done within an objective process that provides certainty, involves recognized stakeholders, and addresses their interests.

"A Court-approved capital raising process is already in place. All interested parties have had the opportunity to take any concerns about that process to the Court. The company with the assistance of its advisors are implementing that process with the interests of all stakeholders in mind. We will discharge our responsibility, proceed with the Court-approved process and report to all stakeholders accordingly."

Tricap 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 Steelworkers and removes Stelco from CCAA protection.

Central to the plan outlined in the Letter of Intent is Tricap's commitment to arrange or provide a total of $1.35 billion in new capital comprised of 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.

Application of the Proceeds would include an immediate C$500 million contribution to Stelco's pension plans, and repayment of approximately C$100 million in existing Stelco secured indebtedness. In addition, C$750 million would be retained within Stelco to fund its capital expenditure process and for general corporate purposes. As part of the plan, claims by current unsecured creditors would be satisfied through the issuance of new equity in a recapitalized Stelco.

Bill Ferguson, President of the Steelworkers' Local 8782 said, "The time to recapitalize Stelco is now. The union recognizes the urgency of the situation and we believe that working together with Tricap we have now a strong financial partner and a viable plan to recapitalize Stelco. We call upon Stelco and the court to immediately provide Tricap with full access to the information necessary for Tricap to finalize its commitment."

"A joint Steelworker/Tricap Plan would incorporate the union's seven principles and deal decisively with Steelworker concerns about the pension plan deficit", commented United Steelworkers' National Director Ken Neumann. "A Steelworker/Tricap Plan would look to the future and fully fund necessary capital expenditure requirements and provide a significant liquidity cushion to Stelco."

Cyrus Madon, Managing Partner, Tricap Restructuring Fund commented: "We believe the Steelworker's Plan is fair to all stakeholders and appropriately addresses the employee pension fund shortfall, which we consider to be critical to the success of any plan and the long-term viability of the restructured company. Stelco has the potential to once again lead the industry, backed by a committed and experienced workforce, strong management team and positive business fundamentals and industry dynamics. We look forward to the opportunity to work with Stelco management and its other stakeholders to bring the CCAA process to a certain and successful close", concluded Madon.

The United Steelworkers of America represents over 255,000 men and women working in every sector of Canada's economy. As a result of Wednesday's vote by delegates to a Paper Allied Industrial, Chemical and Energy Workers International Union (PACE) convention in Las Vegas, the new, merged union represents 850,000 workers continent wide, the largest industrial union in North America.

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.

Tricap Restructuring Fund, established by Brascan Corp. in 2001 with institutional partners, including the Canada Pension Plan Investment Board, provides a source of patient, long term capital and strategic assistance to companies experiencing financial or operational difficulty. Within the steel industry, the Fund was recently the lead investor in steel fabricator VicWest Inc., facilitating that company's successful turnaround.

Brascan Corp. is an asset management company focused on property, power and infrastructure assets. The company has direct investments of $20 billion and a further $7 billion of assets under management, including 70 premier office properties and over 120 power generating plants.