Bedrock Industries-owned Stelco closes $114 mln land deal

Canadian steelmaker Stelco Inc (TSX: STLC) has acquired thousands of acres of lands owned by Legacy Lands LP for about $114 million. The properties are where the company conducts its operations in Hamilton and Nanticoke, Ontario, including lands in Hamilton that contain the Hamilton Works blast furnace and cast houses, as well as developable lands and port facilities. Stelco said the deal provides for greater operational flexibility and will allow it to grow the core business now and in the future. Stelco, which went public last year, raising $230 million, is majority owned by U.S. private equity group Bedrock Industries.


Stelco Announces Land Acquisition

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): (see chart and notes here)

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.

For further information: For investor enquiries: Don Newman, Chief Financial Officer, 905.577.4432,; For media enquiries: Trevor Harris, Vice-President, Corporate Affairs, 905.577.4447,