Over the weekend, Stelco Inc. provided updates regarding its capital raising activities and other matters. In its second update, the company emphasized the importance of its continued focus on maintaining its important business relationship with General Motors.

General Motors had previously named November 18 as the deadline for Stelco Inc. and Lake Erie Local 8782 to have entered into a memorandum of understanding for a collective agreement between the respective parties. General Motors later extended the deadline to 8:00 a.m. on Monday, Nov. 22.

Stelco will satisfy another of GM’s conditions — specifically, obtaining the financing necessary to fund its emergence from CCAA as a long-term viable supplier — pending approval by the Court on Monday. Nov. 22. Stelco announced last week that it had secured financial commitment from Deutsche Bank.

The company received numerous expressions of interest and two detailed proposals over the last several days. Courtney Pratt, Stelco's President and CEO, confirmed the company's plan with respect to dealing with interested parties: "Our efforts with Deutsche Bank have been directed at obtaining a commitment which sets a floor for other bidders. This was the roadmap provided in the Court Order of October 19, 2004. In our view, the Deutsche Bank commitment provides a way out of the CCAA filing if we can move to the implementation stage under the commitment. A first step is Court approval, which we will seek on November 22. Once we have that, we will be able to move ahead with a broad-based capital raising process. We will be looking at other proposals to see if there are better options for Stelco and its stakeholders."

Supplemental Eleventh Report of the Monitor—The company has also indicated that the Monitor issued its Supplemental Eleventh Report. In that report, filed with the Ontario Superior Court of Justice by the Monitor, are some additional details of a proposal from GMP Securities and GE Finance Canada to replace Deutsche Bank as the stalking horse in the capital raising process have been provided. Commenting on the GMP/GE Finance Canada proposal, Mr. Pratt said: "We are examining all of the suggestions that are submitted to us. The GMP/GE proposal, which would have them replace Deutsche Bank, has some attractive features. One of the issues with respect to the proposal, however, is that it is conditional upon satisfactory completion of all business, regulatory and legal due diligence."

While the GMP and GE Finance proposal would provide an aggregate of $1,050 million in financing including a senior credit facility of $650 million as opposed to $900 million in total provided for in the Deutsche Bank commitment, the company has estimated, based on margin requirements set forth in the GMP and GE Financing proposal and current and projected levels of Stelco's accounts receivable and inventories, that Stelco would not be able to utilize the proposed senior credit facility in an amount significantly in excess of $500 million. As a result, the GMP/GE proposal will likely not provide a significantly greater amount of financing to Stelco. With the amount of proposed distributions of cash to unsecured creditors proposed by GMP, the company may well also have less liquidity after emergence from the CCAA proceedings with the proposal.

Mr. Pratt said: "We are strongly encouraged, however, that proposals are coming forward. It shows that our capital raising process efforts which commenced with the October 19, 2004 Court Order is beginning to work. We encourage GMP/GE to participate in this process."

The (Nov. 20) Supplemental Eleventh Report of the Monitor provides details of the approach of the company to issues around the capital raising process and the use of confidential information by bidders. To accommodate bidders, Stelco Inc. will be seeking further amendments to the capital process. Amendments will include broader provisions enabling participants in the process to communicate about their proposals to labor unions, salaried employees, retirees and government departments subject to Monitor oversight. Stelco expects these arrangements will improve the ability of interested parties to make proposals and offers in the capital raising process.

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.