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HAMILTON, ON, June 5, 2018 /CNW/ - Stelco Holdings Inc. ("Stelco Holdings" or the "Company"), (TSX: STLC), today announced that its wholly owned subsidiary, Stelco Inc. ("Stelco") has completed the acquisition of lands beneficially owned by Legacy Lands Limited Partnership (the "Land Vehicle") on which Stelco conducts its operations in Hamilton (approximately 760 acres) and Nanticoke, Ontario (approximately 2300 acres), including lands in Hamilton that contain the Hamilton Works blast furnace and cast houses, as well as developable lands and port facilities (collectively, the "Lands"). The purchase price payable for the Lands is approximately $114 million and will be financed with a 25-year, 8% per annum mortgage note (the "Mortgage Note") issued to the Land Vehicle. The quarterly Note payments will be distributed by the Land Vehicle to fund various pension and other post-employment benefit commitments ("OPEBs") for Stelco retirees.
In connection with the Land acquisition, existing lease arrangements between Stelco and the Land Vehicle were terminated and the associated rental payments have been cancelled. In addition, Stelco has entered into an amended OPEB funding agreement (the "Amended OPEB Funding Agreement") that reduced Stelco's exposure to future variable funding requirements (including future excess free cash flow contributions) and provided the independent employee life and health trusts ("ELHTs") established as part of Stelco's CCAA reorganization, with a fixed funding commitment by Stelco.
The Amended OPEB Funding Agreement replaces Stelco's funding obligations under the OPEB funding agreement that was entered into at the closing of Stelco's CCAA reorganization (the "Original OPEB Funding Agreement"). The following outlines Stelco's OPEB funding obligations (excluding payments associated with excess free cash flow):
| Original OPEB Funding |
Amended OPEB Funding Agreement |
|
| Years 1-10 |
Average annual funding of $26.4 million |
Average annual funding of $33 million |
| Years 11-20 |
Average annual funding of $20.2 million |
Average annual funding of $30 million |
| Years 21-25 |
Average annual lease rental payments of |
Average annual funding of $15 million |
_________________________
1 Assuming maximum free cash flow payments under the Original OPEB Funding Agreement.
2 Management assumption that lease rental payments continue to be allocated to OPEBs
The Land acquisition provides Stelco with the flexibility to utilize the Lands for its existing operations and allows Stelco to develop the Lands in a manner that both complements our current and future operations and pursue others uses for the Lands. In addition to providing for more fixed annual funding of OPEBs, the Amended OPEB Funding Agreement and Mortgage Note payments could save Stelco up to $87 million compared to the Original OPEB Funding Agreement and lease payments and eliminates Stelco's variable funding obligations tied to excess free cash flow that could have resulted in significant additional OPEB funding contributions.
Stelco continues to receive the benefit of the environmental release in respect of the Lands that was granted by the Ministry of the Environment and Climate Change on closing of the CCAA reorganization.
"This acquisition provides Stelco with significantly greater strategic operational flexibility and allows Stelco the ability to grow its core business. Our retirees and employees will also directly benefit as this new arrangement will provide more certainty in terms of the funding to be provided by Stelco to the ELHTs to support OPEBs. Additionally, we look forward to engaging with various other parties including the City of Hamilton on further development opportunities of the land and port area" said Alan Kestenbaum, the Company's Executive Chairman and Chief Executive Officer.
About Stelco
Stelco is a low cost, integrated and independent steelmaker with one of the newest and most technologically advanced integrated steelmaking facilities in North America. Stelco produces flat-rolled value-added steels, including premium-quality coated, cold-rolled and hot-rolled steel products. With first-rate gauge, crown, and shape control, as well as reliable uniformity of mechanical properties, our steel products are supplied to customers in the construction, automotive and energy industries across Canada and the United States as well as to a variety of steel services centres, which are regional distributers of steel products.
Forward-Looking Information
This release contains ''forward-looking information'' within the meaning of applicable securities laws. Forward-looking information may relate to our future outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategy, budgets, operations, financial results, taxes, dividend policy, plans and objectives of our Company. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as ''plans'', ''targets'', ''expects'' or ''does not expect'', ''is expected'', ''an opportunity exists'', ''budget'', ''scheduled'', ''estimates'', ''outlook'', ''forecasts'', ''projection'', ''prospects'', ''strategy'', ''intends'', ''anticipates'', ''does not anticipate'', ''believes'', or variations of such words and phrases or state that certain actions, events or results ''may'', ''could'', ''would'', ''might'', ''will'', ''will be taken'', ''occur'' or ''be achieved''. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances may be forward looking statements. Forward-looking statements are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. The forward-looking statements contained herein are presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our financial performance objectives, vision and strategic goals, and may not be appropriate for other purposes.
Forward-looking information in this news release includes the amount of funding payable in respect of the Amended OPEB Funding Agreement, the amount of lease rental payments and the consumer price index escalation in respect thereof over the term of the Hamilton and Lake Erie Works leases, the expected cost savings under the Amended OPEB Funding Agreement, potential development of the Lands, tactical flexibility resulting from the acquisition of the Lands, increased fixed funding obligations along with reduced variable funding obligations. Undue reliance should not be placed on forward-looking information. The forward-looking information in this press release is based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. Certain assumptions in respect of our ability to complete the transactions, as well as those set out in this press release, are material factors made in preparing the forward-looking information and management's expectations contained in this press release.
Such forward-looking information is subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results or achievements to be materially different from those expressed or implied by such forward-looking information, including: arriving at mutually acceptable terms in respect of the transactions between Stelco and various stakeholders as well as those described in the Company's annual information form and the Company's MD&A for the period ended December 31, 2017 available under the Company's profile on SEDAR at www.sedar.com.
There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward looking information, which speaks only as of the date made. The forward-looking information contained in this press release represents our expectations as of the date of this news release, and are subject to change after such date. Stelco Holdings disclaims any intention or obligation or undertaking to update publicly or revise any forward-looking statements, whether written or oral, whether as a result of new information, future events or otherwise, except as required by law.
SOURCE Stelco
For further information: For investor enquiries: Don Newman, Chief Financial Officer, 905.577.4432, [email protected]; For media enquiries: Trevor Harris, Vice-President, Corporate Affairs, 905.577.4447, [email protected]
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