Slater Steel Files Chapter 11

Another steel company files for bankruptcy protection.

Slater Steel Inc. announced that it, and certain of its U.S. and Canadian subsidiaries have filed for creditor protection under the Companies' Creditors Arrangement Act in Canada.

Slater and certain of its Canadian subsidiaries have also filed for protection under Section 304 of the U.S. Bankruptcy Code and Slater's U.S. subsidiaries have filed for protection in the U.S. under Chapter 11 of the U.S. Bankruptcy Code. The concurrent filings will allow Slater to develop a restructuring plan to address its current debt, capital and cost structures.

"Although we have made significant progress in refocusing Slater exclusively as a specialty steel producer and lowering the company's cost structure, today's announcement is attributed to the fact that the conditions to the closing of the previously announced refinancing were not satisfied within the allocated time frame," said Paul A. Kelly, president and CEO, Slater Steel Inc. "In view of this situation, as well as mounting liquidity pressures, we have determined that CCAA/Chapter 11 reorganization is the most efficient and effective way to restructure Slater Steel and position the Company for long-term financial stability."

The specialty steel industry has been negatively impacted by the recent economic slowdown that has resulted in weak demand and soft pricing. The stainless steel bar market has experienced one of the most severe downturns ever due to the severe contraction of the capital goods sector. For example, in 2002, Slater's shipments of higher value alloys, used in the aerospace, power generation and semi conductor industries, declined by 30 percent from the prior year notwithstanding that its market share remained constant.

In addition to these challenges, a number of other factors have adversely affected Slater's operating results and financial condition. For example, the benefits of Slater's lower cost structure were offset by lower production levels particularly in the stainless bar division. More recently, rising costs for natural gas, electricity in Ontario where Slater operates two facilities, scrap and nickel - significant components of steel production - have generated additional working capital requirements and negatively impacted margins.