G Steel finalises debt plan | Debt-to-equity swap done by year-end

G Steel Plc, a financially troubled hot-rolled coil maker, will float 8.85 billion new shares in a debt-for-equity swap with creditors as part of its $534-million debt restructuring plan.



Garas: Production hike planned

Chief executive Ahab Garas, appointed the head of G Steel in early February, said bond holders and trade creditors would ultimately hold 40% of the company's stock. The company currently has 13.9 billion shares outstanding.



Under the restructuring plan, 3.2 billion shares will be allocated to investors in the company's $170-million senior bond due Oct 4. Another 5.6 billion shares will be offered to trade creditors holding debt of $300 million.

Based on G Steel's market price of 0.37 baht per share on Mar 25, the swap represents a recovery rate of 20% for creditors. The plan is subject to final approval from G Steel shareholders later this year.

The restructuring plan would impose a 30-month silent period on the creditholders accepting the equity swap. Equity would be in the form of non-voting depository receipts, with the company projecting a recovery value for creditors ranging from 20% to 100%, depending on the appreciation of share values post-restructuring.

G Steel missed an interest payment on the senior bonds last October, following a missed payment on a bank loan last April.

The firm, founded in 1995 by Somsak Leeswadtrakul, reported a loss of 8.58 billion baht last year on revenues of 25.1 billion, compared with a 2008 loss of 1.23 billion on revenues of 41.7 billion.

Mr Garas said the plan would be critical for the successful restructuring of an additional $64 million in secured loans owed by Oriental Access, a wholly owned subsidiary of G Steel.

G Steel chief financial officer Ari Levy said the Oriental Access debt would be paid in cash received from new strategic partners. He said G Steel is in talks with a number of potential partners, including Japan's Mitsui & Co.

"But strategic partners will not be willing to inject the money into G Steel until the first part of the financial restructuring is concluded," said Mr Levy.

G Steel, in a notice to the Stock Exchange of Thailand yesterday, said Oriental Access must make a $10-million repayment by May 1 and a $20-million repayment on Sept 1. Final payment of $25 million in principal and all outstanding interest and fees will be due Jan 3. The debt was cut by $8 million in principal and $4 million in interest after the claim and sale of 850 million G Steel shares pledged as collateral.

Mr Garas and Mr Levy were appointed to G Steel from Turnaround Steel Management, a consultancy leading the financial restructuring and rehabilitation plan of the company. Mr Somsak is vice-chairman of the firm.

"So far, several of G Steel's key creditors have already expressed preliminary support for this plan," Mr Garas said, adding that the plan should be completed by the second half of 2010.

Mr Levy said the plan had been structured to benefit all stakeholders.

"We are confident that the restructuring will be successful as the plan is designed for the benefit of new and existing shareholders without dilution effects," he said.

"Two major reasons why we are here is that we believe in the company's good assets while the steel industry in Thailand and Southeast Asia has great growth potential," he said.

G Steel and its subsidiary G J Steel Plc have a capacity of 3 million tonnes of hot-rolled coils per year, but limited working capital and the economic crisis forced the firm to cut production. Production would be raised within 90 days following the recapitalisation.

Shares of G Steel closed 29/03/2010 on the SET at 0.38 baht, unchanged, in trade worth 19 million baht.

European stainless sheet market could be overheating

The European flat rolled stainless steel market is slightly overheated at the moment, several market sources believe. This is leading to concern that the ongoing upward movement in base prices could come to an abrupt end, especially as extended mill lead-times are now approaching the quieter summer holiday period.


Although mills are only achieving modest base price increases of €30-50/tonne each month , transaction prices have been rising very fast as nickel continues to propel surcharges on austenitic grades ever higher.

Korean rebar steel imports jump 43%

Korea’s rebar imports in January jumped 43% from last December to 75,000 tonnes, the highest monthly total since October 2008. The reason of rising import is believed that consumer buying during February-March will be active in preparation for spring construction starts.


Meanwhile, rebar stocks of Korea’s seven major producers dropped to 220,000-230,000 tonnes, a decrease of 120,000-130,000 tonnes from early January. Also, domestic rebar output is expected to decline this month due to the fewer working days and maintenance plans by most local makers. February’s output is estimated to stay around 600,000 tonnes compared with January’s 740,000-750,000 tonnes.

Vale wins a 90% price hike in iron ore

On 30 March, Vale reaches agreement with Nippon Steel and Sumitomo Metal Industries to supply a 65% Fe Itabira fines at $100-110/tonne fob during in April-June. The new agreement between Vale and Japanese steel mills is the end of annual iron ore contract price system. Previously, BHP Billiton and Rio Tinto have already switched iron ore contract to quarterly or shorter basis. The new quarterly prices is accounted about 90% hike over the last year’s annual contract prices of $55.53/t and close to an average spot price for 62% Fe fine ore of about $126/tonne cfr China.

LME billet trading make a new record

The price of the three-month contract traded for Mediterranean billet on the London Metal Exchange reached $620/tonne on 29 March. That was accounted a new high record for the last eighteen-month. Meanwhile, the cash contract also hiked $595/t.



A trader told that the higher prices reflect movements in the physical market and a higher price of raw material. In addition, the volume of trading on the London Metal Exchange also reached the new record of 693,030 tonnes traded in March

Stainless prices rise in East Asia

Prices of East Asian-origin 304 stainless cold rolled sheets rise by $200/tonne in the end of March. Offer prices for Korean producers are now $3,300-3,400/t, up from $3,100-3,200/t in the last week. Moreover, Taiwan’s largest stainless steelmakers, Yieh United Steel Corp (Yusco), also announced an increase of $200-300/t to its April export prices.
Price hike in Asian stainless steel was the result of higher raw material prices. On 31 March, three-month nickel prices just reach a $25,000/tonne level, outpace the last year’s high record of $24,970/tonne.





Blog Search: The Source for Blogs Listed in Blogs By Country Add url to free web directory Steel Shop!