Sep 18 2004
Stelco Inc. today issued the following update on its Court-supervised restructuring in response to recent speculation and changes in the trading price of the Company's shares.
The unforeseen and unprecedented change in the steel pricing environment has eased Stelco's immediate liquidity crisis. But what many still view as unsustainably high prices cannot address the Company's long term structural problems.
Stelco faces a growing competitiveness gap with its competitors. Many of them are benefiting even more from the same high steel prices because of their lower cost structure and their ability to raise and invest capital to upgrade their operations.
The fact remains that Stelco is insolvent. It does not have the money to repay the more than $550 million in stayed debt and other obligations that would become due and payable should the Company's CCAA process be terminated. In addition, Stelco has approximately $250 million outstanding on its main operating line of credit. The Company also requires $360 to $465 million for its critical capital expenditure program.
That said, these historically high steel prices have provided Stelco with some flexibility in approaching its restructuring. The Company is planning, and will seek the Court's permission in the coming weeks, to embark on a process to determine what capital may be available to help address Stelco's obligations and to finance its critical capital expenditure program. Once the Company knows what capital is available to deal with its debt and other obligations, and under what conditions, it will have a better idea of what other restructuring activity may be required.
Stelco is not aware of any corporate developments that would account for recent changes in the trading price of the Company's shares. While the shares continue to be traded, there is a significant risk that they will have no value when a restructuring plan is completed.
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