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Stelco Comeback Hearing Scheduled for This Week
02/11/2004 -
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Stelco Comeback Hearing
Scheduled for This Week
Feb. 11, 2004 — Stelco Inc. provided an update on the corporation's restructuring situation following a filing pursuant to the Companies Creditors Arrangement Act on January 29, 2004.
The comeback hearing provides an opportunity for stakeholders to seek changes to the original order issued by the Ontario Superior Court of Justice. Stelco expects its comeback hearing, scheduled to take place on February 13, 2004, to proceed as planned. |
Operations—Since filing for creditor protection, Stelco is experiencing few disruptions in operations in relation to customer orders and shipments. Customers have continued to support the corporation as it initiates its restructuring efforts, and Stelco reports that suppliers have also shown significant support.
Mr. Courtney Pratt, President and CEO, commented, "We have been greatly encouraged by the response of our employees, customers and suppliers since the announcement of our restructuring process. Our personnel have continued to focus on doing their jobs safely and well. Customers have indicated their support as we continue to meet their needs. Suppliers are providing us with the goods and services we need to carry on business through this process."
Liquidity—Stelco’s liquidity position, which declined both in the third and fourth quarter, is expected to continue to further erode through 2004 absent implementation of a broad-based restructuring plan. The corporation is expected to have sufficient credit available to operate throughout 2004.
As of January 31, 2004, Stelco’s utilization of its credit facilities was approximately $270 million, leaving available credit of about $80 million under the $350 million senior credit facility. In addition, the corporation has obtained a commitment from its lenders for a $75 million DIP facility; documentation of this court-approved facility is expected to be completed by the end of February.
| Stelco remains optimistic that it will be able to develop a restructuring plan that allows it to proceed with the proposed Hamilton No. 4 pickle line, the Hamilton cogeneration facility, and the Lake Erie hot strip mill upgrade. However, the upgrades alone will not resolve the corporation's competitiveness issues. Action will be required on the corporation's cost structure to address not only competitiveness, but also allow it to achieve returns that will allow it to raise capital for future reinvestment. Stelco noted that, while steel prices are rising, the increases are critical to offsetting rising input costs. |
Fourth Quarter Results—The corporation fourth quarter financial statements will be released in mid-March. Stelco cautions that net earnings will continue to show deterioration through to the end of the fourth quarter 2003. In addition, it is expected there will be significant non-cash write-offs related to the valuation of future tax assets and other assets. Consolidated cash usage during the fourth quarter was approximately $30 million, which is substantially the same as usage in the third quarter.
Strategic Review and Restructuring—With respect to its strategic business review, Stelco reported that it is working with a global specialist in the steel industry to assist it in developing a comprehensive business plan as well as benchmarking its operations and advising on the future of some of the corporation's assets and product lines. Mr. Pratt noted that no final decisions have been made at this point on assets and product lines.
Through its Chief Restructuring Officer, Hap Stephen, Stelco’s restructuring efforts are underway. The corporation is working with key stakeholders to establish a framework for the restructuring process and to open lines of communications.
Share Ownership—Mr. Pratt noted that its largest shareholder, the Caisse de dépôt et placement du Québec, had sold its approximate 20% interest during January according to publicly filed records.
Stelco Inc., Canada's largest and most diversified steel producer, is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. Stelco has a presence in six Canadian provinces and two states of the United States. Consolidated net sales in 2002 were $2.8 billion.
