Workers at two Stelco Inc. mills will vote Friday on new labour agreements, the last big step left for the company before it emerges from creditor protection.J.P. MOCZULSKI/The Globe and Mail
Stelco Holdings Inc. plans to raise $150-million in an initial public offering, money that the Hamilton-based company will plow into production of high quality steel for auto makers and construction projects.
Stelco, which exited creditor protection earlier this year after its second court-overseen restructuring, filed for an IPO Wednesday. The company said it needs money to develop new products and make early payments to its pension plans. Sources familiar with Stelco's plan said the company intends to raise a minimum of $150-million and could sell $200-million of shares if there is strong investor demand.
"We believe we own the newest and one of the most technologically advanced integrated steel-making facilities in North America," Stelco said in a prospectus filed Wednesday with regulators. "We aim to grow our shipments of galvanized and galvanneal products that are primarily used for construction and automotive applications.
"Our operations currently have substantial excess capacity and we believe this excess capacity is accessible with limited capital investment," said the prospectus. Goldman Sachs & Co. and BMO Capital Markets are leading the underwriting, and the company is planning an IPO marketing campaign that targets Canadian and U.S. investors.
Stelco said it eliminated $3-billion in debt and $1.4-billion in pension and benefit obligations during its recent restructuring. As of June 30, the company said the only debt on its balance sheet was $68-million drawn on a $375-million asset-backed credit facility.
Stelco is currently owned by private equity fund Bedrock Industries LLC, which won the bidding for the century-old steel maker after the company's Canadian operations were put into creditor protection in 2014. Bedrock acquired Stelco to gain control of the company's integrated steel mill in Nanticoke, Ont., whose steel is prized by North American auto makers because it is among the highest quality steel produced.
The strip mill at the Lake Erie works in Nanticoke can process 3.7 million tonnes a year, while the Hamilton facility has capacity to make just 2.8 million tonnes of steel annually.
Stelco said it plans to buy slabs and run them through the Lake Erie strip mill to bring it up to full capacity. As production volumes increase, costs should fall and raise profit margins, the prospectus said. Stelco also said its Z-line galvanizing mill in Hamilton that processes steel for automotive body panels and other high-end auto applications is currently underutilized. The company also has a coke plant in Hamilton and water treatment facilities at that mill with excess capacity and the company said it hopes to find third parties that will become customers of the facilities.
Stelco was taken over by United States Steel Corp. in 2007 during a worldwide steel industry consolidation that swept up all Canadian-owned steel producers. U.S. Steel placed its Canadian unit in CCAA protection in 2014 after losing more than $1-billion at the operation during its seven-year ownership period.