U.K. Court Orders Stemcor Lenders to Vote on Restructuring

A U.K. judge ordered lenders to Stemcor Holdings Ltd. to vote on a debt restructuring plan as the steel trader seeks to extend more than $1 billion of loans and raise new debt.

Creditors must vote Feb. 19 on a plan that includes converting existing debt into $1.1 billion of term loans maturing at the end of 2015, according to a ruling today from Justice Vivien Rose. The London-based trader faces insolvency if the proposal isn’t approved, according to a company filing presented to the judge.

Stemcor failed to repay an $850 million credit line last year after reporting a loss in 2012 amid lower demand for steel. It was then given more time by lenders to repay the debt as it replaced chairman Ralph Oppenheimer with restructuring specialist John Soden and sought to sell assets in India.

More than 80 percent of lenders to the $850 million loan, as well as a $225 million facility for its Singapore-based unit, have indicated their support for the deal, according to the document. The restructuring plan is part of a U.K. legal process known as a “scheme of arrangement,” which typically requires the backing of 75 percent of creditors.

New Loan

Stemcor’s creditors have also been asked to provide a new $1.15 billion loan to enable it to continue operations, the filing shows. Lenders to the borrowing base facility will be rewarded with increased allocations to the highest-ranking portion of the restructured loans. These comprise a $200 million super-senior term loan, a senior portion and a junior facility all maturing Dec. 31, 2015.

Providers of the $850 million loan, which replaced a $772.5 million loan from the previous year, include ABN Amro NV, BNP Paribas SA and HSBC Holdings Plc, according to data compiled by Bloomberg. BNP Paribas was one of the banks that provided the loan borrowed by its Singapore unit on Oct. 9, 2012, according to the filing. That deal will be replaced by a $224 million loan maturing Dec. 31, 2015.

If the restructuring completes Stemcor will be able to repay debt using cash as well as proceeds from disposals, including its operations in India, according to the document. JSW Steel Ltd. and Jindal Steel & Power Ltd. have submitted separate bids for the Indian assets, Jindal executives said this week.

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