WCI Steel Amends Credit Agreement with Harbinger Capital Partners
12/28/2007 - WCI Steel will modify its existing $150-million credit facility with Harbinger Capital Partners Master Fund I, Ltd. The modification provides the company with the additional liquidity and financial flexibility needed to return to full operations after a November fire at the blast furnace hydraulic control rooms
WCI Steel, Inc. has entered into an agreement to modify its existing $150-million credit facility with Harbinger Capital Partners Master Fund I, Ltd., replacing the current bank group.
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Although we still have challenges ahead of us, I am confident that with the increased liquidity, the support of Harbinger, and working together with our customers, suppliers and employees, we can successfully implement solutions to the challenges facing WCI Steel.
“With the assistance provided by the amended financing, we will be able to ensure a brighter future for WCI Steel."
Leonard M. Anthony,
President and CEO,
WCI Steel
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With the amendment to the credit facility, certain advance limitations under the agreement will be waived until July 31, 2008, and the company will be able to fully utilize its current $150-million facility in the near term.
Initial borrowing under the facility will carry an interest rate of LIBOR plus 5.0%. The interest rate on each borrowing in excess of collateral valuations equals 15%. Subsequent to March 31, 2008, the interest rate on each advance in excess of collateral valuations increases at the rate of 0.2% each week.
Following Harbinger's purchase of the bank group’s interests and the amendment to the credit agreement, the company issued to Harbinger two-year warrants to purchase common stock equal to 25% of the company's common stock on an as-converted basis, after giving effect to the issuance and exercise of the warrants, at an exercise price of $0.01 per share. If the credit facility is not repaid by April 1, 2008, the company will pay Harbinger an extension fee of 75 basis points on the commitments under the facility.
If the credit facility is not repaid by May 5, 2008, the company will pay Harbinger an additional extension fee in the form of a two-year warrant to purchase additional shares of common stock, at an exercise price of $0.01 per share. This warrant will be exercisable for a number of shares such that all of the warrants in the aggregate would represent the right to purchase 40% of the company's common stock on an as-converted basis after giving effect to the issuance and exercise of the warrants. The warrants will be transferable and have customary registration rights. Under no circumstances will the warrants be exercisable to the extent that their exercisability would result in a change of control under the indenture governing the company's 8% senior secured notes due 2016. Certain holders of the company's preferred shares will be given the right to participate as lenders under the credit agreement and to receive a portion of the fees payable to Harbinger.
Assuming that all warrants are issued and exercised, the non-Harbinger common shareholders' ownership will decline from 29.3% to 7.7% of the company.
The company said that it expects to post on its website additional information regarding this transaction by mid-January.
WCI Steel is an integrated producer of value-added, custom steel products serving niche markets, emphasizing customer and technical service. The company currently produces 185 grades of flat-rolled custom and commodity steel products at its Warren, Ohio facility, focusing on a wide range of custom flat-rolled steel products, including high carbon, alloy, ultra-high-strength, and heavy-gauge galvanized steel. WCI Steel is also focused on developing closer, more responsive relationships with customers. Major customers include steel converters, processors, service centers, construction product companies and, to a lesser extent, automobile manufacturers.
