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Stelco Initiates Court-Supervised Restructuring

Jan. 30, 2004 — Stelco Inc. is initiating a Court-supervised restructuring in order to restore its financial health and competitive position in the North American steel industry.

Stelco has obtained an Order under the Companies' Creditors Arrangement Act (CCAA) that covers Stelco Inc. and its subsidiaries, Stelpipe, Stelwire, CHT Steel, and the previously closed Welland Pipe. Other subsidiaries, including AltaSteel, Norambar (formerly Stelco-McMaster), and Stelfil, are not participating in this process.

The Order will stay the company’s obligations to creditors, including debenture holders and suppliers, for the customary initial period of 30 days. The stay period may be extended upon subsequent applications to the Court. Stelco will continue to pay suppliers for goods and services provided after the date of the Order; claims prior to the Order will be the subject of discussion with creditors and will be addressed in the restructuring plan. Ernst & Young Inc. will serve as the Court-appointed Monitor under the CCAA process and will assist the company in formulating its restructuring plan.

Courtney Pratt, Stelco’s President and CEO, said, "A thorough financial and strategic review has concluded that we face a serious viability issue. Our problems include a high cost structure, a deteriorating cash position and an inability to compete against other steel companies that have benefited from their own restructurings. The company cannot continue to produce losses and consume considerable amounts of cash. We need to reduce our costs, improve productivity, focus on key operations and products, and become more competitive.

"Recent increases in steel prices have not been, and are not expected to be, sufficient to offset the even more significant past and projected escalation in our costs. While we have begun to implement a number of cost control measures, we do not and will not have the liquidity we need without the legal protection and other benefits provided by a Court-supervised restructuring process. The sooner we act, the better our ability to preserve the cash we need, fix our problems, emerge as a stronger company and attract the capital to fund the capital expenditures that will make us more competitive.

"We believe today's action is the responsible course to take. Other companies have used this process successfully and we expect to do the same. In examining ways to reduce our cost structure we intend to deal with all stakeholders, including employees and retirees, in a fair and responsible manner. We believe that a successful restructuring will achieve greater benefit for stakeholders than any other available alternative."

Stelco has access to the funds needed to conduct its business during this period, as the company's existing lending syndicate will maintain the current operating credit facility of $350 million. The syndicate, which will also make available a further $75 million in the form of debtor-in-possession financing, is led by CIT Business Credit Canada Inc. and also includes GE Commercial Finance and Fleet Capital.

Stelco also announced the appointment of Hap Stephen as Chief Restructuring Officer, effective immediately. Mr. Stephen is one of Canada's leading restructuring advisors, having assisted a number of major corporations in their successful reorganization activities. He will work with the Board and senior management in directing the company's restructuring process.

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.

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