Stelco Inc.’s Board of Directors unanimously approved a term sheet with Deutsche Bank Securities Inc. and Deutsche Bank AG. The term sheet provides for a recapitalization of Stelco Inc. involving a financing of $900,000,000. The financing includes an asset-based loan facility co-underwritten by Deutsche Bank AG and CIT Business Credit Canada, for which Deutsche Bank Securities Inc. will act as Lead Arranger, and a purchase commitment by Deutsche Bank Securities Inc. of Stelco Inc. convertible notes and bridge notes.

Terms of the financing do not include any requirement for wage, benefit or pension concessions from any of the company's union locals, other employees or retirees. Compensation of current employees and related benefits together with pension benefits and post-retirement benefits will not be reduced under the financing.

The arrangements with Deutsche Bank flow from the court-approved process dated October 19, 2004 in which Stelco was authorized to receive proposals from its bondholders, including Deutsche Bank. Consistent with this process and the related court order, the company may now move forward with its capital raising process which will include soliciting other capital raising opportunities with the reasonable assurance that it can emerge from creditor protection.

Stelco will use proceeds from the financing to underwrite capital costs associated with its strategic capital expenditure program, which is an important part of its previously announced four-point strategy for the future. The company will retire its existing operating credit line with the new facilities and will proceed with its previously announced sales of various businesses. Existing shareholders will receive warrants exchangeable into a modest portion of the new equity of Stelco Inc. created upon emergence from court protection. The warrants will be exercisable at a premium to the market value of the new equity shares of Stelco at the time of emergence from court protection.

Stelco’s ability to draw on the package of credit facilities is governed in part by the requirement to establish a new collective agreement with the United Steelworkers of America Local 8782 on terms substantially the same as the existing collective agreement. Other conditions apply to accessing the facilities including the absence of any material adverse change pending closing and various other tests applicable to the financial condition of the company.

Courtney Pratt, Stelco President and CEO, said, "This transaction will benefit the company and its stakeholders in a number of ways. It would assist us in exiting our Court-supervised restructuring, preserve the income of our employees and the pension and other benefits of our retirees, and provide significant assurance to General Motors. We are encouraged by General Motors' preliminary positive reaction to this financing. We will continue to seek a collective agreement with Local 8782 so that we can meet one of the key conditions of Deutsche Bank and provide the assurance GM requires in order to continue our important relationship."

Hap Stephen, the company's Chief Restructuring Officer, said, "The recapitalization proposal from Deutsche Bank gives Stelco the financing it needs to emerge from CCAA protection with an improved balance sheet and the necessary capital to move ahead with its critical capital expenditure program. Creditors will receive significant recoveries in cash and new equity shares. Our focus now will be to move ahead with the capital raising process in earnest which will include actively soliciting other proposals."

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.