Stelco Inc. provided further details of the transaction announced on November 14, 2004, with respect to a proposal from Deutsche Bank Securities Inc. and Deutsche Bank AG.

The parties have signed a term sheet providing for the recapitalization of Stelco Inc. involving a financing package of $900 million. 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.

Components of the proposed financing pursuant to the term sheet that has been agreed between Stelco Inc. and Deutsche Bank include:

• A $500 million syndicated asset-based loan facility co-underwritten by Deutsche Bank AG and CIT Business Credit Canada. This facility would replace the company's current asset-based operating facilities. Of the total facility, $300 million would be available to the company immediately upon emerging from the Court-supervised restructuring. The balance would be specifically available to fund strategic capital projects.
• $300 million of 7% second priority senior secured convertible debentures purchased by Deutsche Bank. These funds would be available to the company immediately upon emerging from the Court-supervised restructuring. The notes would have a seven-year term and would be convertible into 47.6% of the company's new equity on a fully diluted basis. After 24 months the company can require conversion of the debentures if the closing price of the common stock exceeds 175% of the conversion price for at least 20 consecutive trading days.
• Up to $100 million of 9% second priority senior secured notes to be purchased by Deutsche Bank. These notes would constitute bridge financing providing the company with funds if required prior to the receipt of proceeds from the sale of non-core assets (in excess of the first $75 million of net proceeds, which goes to working capital). These bridge notes would mature 12 months after being issued.

Proceeds of the financing package would be used in the following manner:

• $400 million in cash would be used to repay, in part, unsecured creditors including senior note holders, unsecured trade creditors and holders of the company's convertible debentures. These stakeholders would receive the above-noted cash amount plus new shares in the company on a pro-rata basis based on allowed claims, subject to contractual subordination provisions. It is anticipated that the share component would constitute 40.1% of the company's new equity on a fully diluted basis.
• Approximately $100 million, plus cash generated by the company, would be used to retire the outstanding balance on the company's current asset-based operating and debtor-in-possession credit facilities.
• $200 million would be used to help fund the company's strategic capital program. The balance of the funds required for that purpose would come from the proceeds of the Court-approved asset sale process as well as from cash generated by the company.
• The balance of the proceeds will be used for working capital and other corporate purposes.

Existing shareholders would be provided with two tranches of five-year warrants, exchangeable into 9.3% of the company's new equity on a fully diluted basis. Approximately 6.8% of the warrants would be exercisable at a 20% premium to the initial assumed share price following the company's emergence from Court protection. The balance would be exercisable at a 30% premium. Currently outstanding shares would be cancelled.

The Deutsche Bank commitment also provides for a management equity plan. It will allow the new Board of Directors to put in place a plan to allow management to receive post-restructuring up to 3% of the reorganized company's equity on a fully diluted basis at an exercise price equal to the greater of (i) the initial assumed share price plus a premium of 20%; and (ii) the then-current market price. All grants under the management equity plan will be authorized by the new Board of Directors of the reorganized company.

The term sheet provides for a break-up fee should Stelco decide not to proceed with the Deutsche Bank commitment, but rather, choose to pursue another alternative. The break-up fee is payable if Stelco enters into a competing transaction or certain other events occur and is payable on a graduated basis. Through to the end of December 31, 2004, the break-up fee is approximately $6 million. After that time, the break-up fee increases on a monthly basis to a maximum of $11.5 million.

Stelco plans to file an application with the Ontario Superior Court of Justice for approval of the Deutsche Bank commitment together with certain amendments to the capital process Order dated October 19, 2004. It is expected that the motion will be returnable on November 22, 2004. The materials, when filed, will be made publicly available and will include further details of the Deutsche Bank commitment.

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.