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Stelco Reaches Agreement with GM, Receives Court Approval of Capital Raising Process

10/21/2004 - Stelco Inc. received Court approval of a process designed to raise capital and to pursue the sale of non-core assets. The company also announced that it has reached an agreement with General Motors (GM) regarding the sourcing of supply in 2005.

Stelco Inc. received Court approval of a process designed to raise capital and to pursue the sale of non-core assets. The company also announced that it has reached an agreement with General Motors (GM) regarding the sourcing of supply in 2005.

Stelco’s Agreement
with General Motors

Under the agreement reached with General Motors, GM will proceed to source supply from a supplier other than Stelco to meet its requirements for the first quarter of 2005.

GM will defer any further sourcing activities for the balance of 2005 for a thirty-day deferral period beginning Oct. 19. If, during that period, GM receives from Stelco adequate assurances for supply for the balance of the year, GM will enter into an agreement with the company regarding the purchase of steel for the remaining three quarters of 2005.

The assurances being sought by GM are twofold. First, Stelco must have in place a collective agreement or other arrangements satisfactory to GM with the Lake Erie and Hamilton unions to be effective throughout 2005.

Second, Stelco must demonstrate to GM's satisfaction that it can obtain the equity contribution and financing necessary to fund the company's emergence from its Court-supervised restructuring as a long-term viable supplier.

The capital raising and asset sale process will allow Stelco to raise the capital needed to ensure that it becomes a long term viable company coming out of the CCAA process. Stelco was given approval to begin the process of soliciting bids for its non-core businesses.

Stelco was also given permission to begin the process of raising capital for its core business. As a first step, bondholders will be given the opportunity to present a financing proposal which will provide at least $200 million to Stelco by November 8, 2004. The Court made it clear that Stelco is not prohibited from receiving other unsolicited offers from any party during this initial period. After November 8, 2004 Stelco is free to solicit other proposals for raising capital. This process will be conducted in two stages. The first will solicit preliminary expressions of interest from potential investors while the second will entail the completion of due diligence followed by the submission of binding offers. It is anticipated that the due diligence period will be completed on or about January 31, 2005.

The Court also approved Stelco’s engagement of UBS Securities Canada Inc and UBS Securities LLC to assist it with the capital raising and sale process.

Courtney Pratt, Stelco President and CEO, said, "These are welcome and positive developments. The capital raising and asset sale process enables us to explore alternative approaches to raising the capital we need. It will help to determine if there are prospective buyers willing to pay an appropriate price for a number of non-core subsidiaries.

"The agreement with General Motors provides us with the opportunity to preserve the business of our biggest customer. We appreciate the flexibility GM is demonstrating in this matter. We will do everything we can to provide the assurances outlined in today's agreement."


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.