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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 22, 2000
GULF STATES STEEL, INC. OF ALABAMA
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(Debtor-in-Possession as of July 1, 1999)
(Exact name of registrant as specified in its charter)
Alabama 63-114 1013
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
174 South 26th Street
Gadsden, Alabama 35904-1935
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(Address of principal executive offices) (Zip Code)
(256) 543-6100
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On May 22, 2000, the Registrant filed its proposed Plan of Reorganization (the
"Plan") in its Chapter 11 Bankruptcy case with the United States Bankruptcy
Court for the Northern District of Alabama. The Plan must be voted on by
creditors and is subject to Bankruptcy Court approval. The Bankruptcy Court has
scheduled a hearing to consider approval of the Registrant's disclosure
statement with respect to the Plan for June 23, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBIT.
99.1 The registrant's Press Release dated May 22, 2000 (filed herewith)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GULF STATES STEEL, INC. OF ALABAMA
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(Registrant)
/s/ James Grimm
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James Grimm, Senior Vice President and Chief
Financial Officer
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EXHIBIT INDEX
Exhibit Number Description
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99.1 The Registrant's Press Release dated May 22, 2000
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EXHIBIT 99.1
PRESS RELEASE
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Date: May 22, 2000
Contact: Robert Schaal, Gulf States Steel, Inc. (256/543-6105)
GADSDEN, ALABAMA-- Gulf States Steel, Inc. (the Company) of Alabama announced
that it had filed its proposed Plan of Reorganization in its Chapter-11
reorganization case with the United States Bankruptcy Court for the Northern
District of Alabama. According to Gulf States Chairman and CEO Robert Schaal,
"We have been working hard to pull all of the pieces together so we can have a
successful reorganization that will ensure the long-term viability of the
Company." The Plan calls for the Company's $230 million of mortgage note and
trade debt creditors to receive 65% of the common stock of the reorganized
Company in full satisfaction of their claims. Miscellaneous equipment lessors
and secured creditors would be paid in installments over five years. In
addition, the Company would continue to make payments promised to vendors under
the Preferred Vendor Program, so long as vendors continued to extend credit.
Vendors who provide normalized credit post-confirmation would get the benefit of
a new stock buyback program under which the stock they received as a result of
the reorganization could be offered to the Company for repurchase.
The Plan requires that the Company obtain an 85% federal loan guarantee of $130
million of new bank debt to be provided by Bank of America N.A. and a group of
other banks, as well as obtain an additional $75 million revolving loan to cover
working capital needs. A new equity investment of $5 million would be provided
by a group including mortgage note-holders in exchange for 35% of the
reorganized Company's stock.
The Company recently supplemented its federal guarantee loan application with
the commitment letters from its sources of financing. Bank of America is
committed to providing the financing subject to certain conditions, including
the grant of the federal guarantee and the Company's obtaining an economically
acceptable five-year collective bargaining agreement. Schaal noted, "Securing
the
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benefits of the federal loan guarantee will require final approval of a labor
contract with total economic cost no greater than the "final agreements"
rejected by the Union membership in April and May. It is unfortunate that we
could not get final agreement for a contract to assist us in getting a favorable
ruling before the Loan Guarantee Board began making its decisions." The Director
of the Loan Guarantee Board has advised the Company that decisions on all of the
applications will be made very soon. The Company believes that the Board's
credit analysis of the applications was completed last week and that the legal
analysis of the documentation that has been submitted is expected to be
completed this coming week. A final decision could come any time thereafter.
According to Schaal, a $171 million capital improvement program over the next
five years to increase competitiveness and profitability hinges on getting the
federal guarantee and successful negotiation of a new labor agreement. The new
loan facility and cash to be generated from operations would finance that
program. In addition, the proceeds of the Bank of America loans and the equity
investment would be used to provide working capital, retire debtor-in-possession
debt, cover the costs of the restructuring of the company, and make
environmental improvements.
In a parallel related development, an order by the federal district court for
the Northern District of Alabama approving the consent decree resolving all
pending claims against the Company for violations of the Clean Water Act and
potential claims under the federal CERCLA law was entered last week. The period
for comments on the proposed decree closed on May 17, without objection to entry
of the order from any party. Schaal observed, "We have been trying to act as
responsible corporate citizens to deal with environmental damage done long ago.
However, the Department of Justice, EPA, the Company and even the District Judge
recognize that without the new labor contract and the federal loan guarantee,
there will be no way we can perform our obligations under the consent decree,
and that will be a real tragedy for this community." As Judge Buttram, the U.
S. District Judge wrote when entering the environmental consent decree, ... "the
Court is well aware that Defendant Gulf States Steel, Inc. has made application
for a federally insured loan and that it intends to utilize a portion of the
proceeds of said loan to meet its environmental obligations. The Court is also
aware that Defendant Gulf States Steel, Inc. and the United Steelworkers of
America (the union representing the non-management employees of Gulf States
Steel) have yet to reach a new collective bargaining agreement to replace the
present agreement which expires on October 1, 2000 and that failure to reach
such new agreement will likely adversely impact the loan application. The Court
hopes that the company and the union can resolve their differences without
compromising their principles. When all else fails a good dose of logic and
common sense will usually break an impasse and lead to a just and fair
conclusion."
