LTV Petitions Bankruptcy Courts to Idle Steel Operations
Cleveland, OH - The LTV Corporation filed motions on November 20 in the U.S. Bankruptcy Court to implement an Asset Protection Plan, reject labor agreements and take other actions necessary to idle its integrated steel operations and prepare the facilities for sale. These actions are necessary because LTV no longer has sufficient liquidity or sources of other capital to operate the integrated steel facilities. The actions taken will help LTV to preserve the value of its assets for the creditors, and protect the environment and the safety of the communities in which LTV Steel operates.
LTV Copperweld, comprised of certain subsidiaries of The LTV Corporation including Copperweld Corporation, Welded Tube Co. of America and the LTV Steel Tubular Division, will not be affected by these actions. LTV Copperweld, headquartered in Pittsburgh, is in the process of obtaining separate financing and will continue to operate and supply its customers with high quality tubular and bimetallic products.
"LTV's management and employees throughout the corporation have done everything in their power to save LTV Steel. It has been clear since last year that the integrated steel unit needed to reduce wage and benefit costs to compete with non-union minimills and foreign competitors, which together now control over half of the domestic steel marketplace. Continued deterioration of the economy forced the Company to again seek direct wage and benefit reductions in order to qualify for $250 million of government guaranteed loans. The company was not able to obtain sufficient reductions," said William H. Bricker, chairman and chief executive officer of The LTV Corporation.
Mr. Bricker thanked National City Bank and KeyBank of Cleveland, the Emergency Steel Loan Guarantee Board, the State of Ohio, Cuyahoga County and the City of Cleveland for their support of LTV's efforts to secure an emergency steel loan. He also expressed LTV's appreciation to the congressional and senatorial representatives that have worked on the company's behalf.
LTV informed its corporate and integrated steel employees of the planned shutdown of facilities in compliance with the Worker Adjustment and Retraining Notification (WARN) act. Employees of LTV Copperweld are not affected. LTV said that wage, salary and benefit programs would continue for approximately two weeks until the Asset Protection Plan is approved by the Court.
The LTV Corporation filed for protection under Chapter 11 of the U.S. Bankruptcy Code on December 29, 2000 as a result of losses incurred by its integrated steel business. LTV obtained debtor-in-possession (DIP) financing in March 2001 and developed a plan to restructure its integrated steel operations as a low-cost, viable business. Obtaining $250 million of government-guaranteed loans was an integral part of the restructuring plan.
On September 27, 2001 National City Bank and KeyBank applied for federal guarantees covering 85% of the principal amount of the loans. Additional assistance from the State of Ohio, Cuyahoga County, the City of Cleveland, and a major supplier to LTV Steel increased the credit support to National City and Key to 98 percent. The Federal Emergency Steel Loan Guarantee Board (ESLGB) could not act on the banks' first application because it did not contain a favorable opinion of LTV's ability to repay the new loans. LTV, in cooperation with the banks and the ESLGB, developed a revised restructuring plan that further reduced operating costs at its integrated steel unit.
Recognizing the deteriorating conditions of the domestic steel industry, the revised restructuring plan required direct wage concessions from LTV Steel's unionized workers, elimination of more salaried jobs, and increased employee contributions toward insurance benefits.
The revised restructuring plan also required retirees to assume a greater share of the cost of company-provided healthcare insurance. (Note: A Modified Labor Agreement negotiated by the company's Committee of Unsecured Creditors eliminated work rules and jobs but did not provide direct reductions in wage rates or healthcare benefit programs.)
National City Bank, KeyBank and Metal Strategies International (independent advisors to the banks), evaluated the revised restructuring plan and submitted to the ESLGB an amended loan guarantee application on November 8. The amended application contained an affirmative comment on LTV's ability to repay the loan. The ESLGB then resumed its consideration of the banks' application. LTV Steel immediately informed the USWA of the revised restructuring plan and the need to obtain wage and benefit cost reductions as a condition to receiving the $250 million in new loans. Representatives of the company and the USWA met on November 1 and again on November 14 to discuss these issues. On November 19, the USWA offered the company concessions that were insufficient to fulfill the restructuring plan and obtain the critical loans.