NEW YORK – Bankrupt steelmaker LTV Corp. (LTVCQ) has come closer to becoming a working company again after New York buyout firm WL Ross agreed Wednesday to purchase its assets and promised to resume production as soon as possible.
WL Ross is paying $325 million for LTV's assets, including two plants in Ohio and two in Illinois, and the assumption of certain liabilities. At their peak, the plants produced more than 8 million tonnes of steel and employed more than 8,000 people.
Plans call for the factories, closed for the last three months, to resume production in the next eight to 10 weeks at a reduced capacity of 4 million tonnes. LTV hopes to generate sales of about $1 billion in the first year.
People familiar with the situation said WL Ross beat two other bidders -- United States Steel Corp. and a group of former steel managers who have come together under the umbrella of Cleveland Steel.
The sources warned, however, that the fate of LTV's assets still lies with U.S. Bankruptcy Judge William Bodoh, who will preside over a hearing on the WL Ross bid in Youngstown, Ohio, Thursday.
If WL Ross is not confirmed as the buyer, LTV would have to pay it a break-up fee of $4 million.
About 10 parties had initially expressed interest in buying most or part of the assets being sold.
LTV, which filed for bankruptcy in 2000, has been among the steel companies hit hardest by cheap imports.
The U.S. steel industry, which has seen 29 bankruptcies since 1997, has lobbied the Bush administration to slap tariffs of up to 40 percent for up to four years on imports.
Washington has committed to look into ways to save the industry, but has yet to say if it will impose duties on steel imports.
UNIONS WELCOME DEAL
Last week LTV said that on March 31, it will stop paying benefits to its retired employees.
WL Ross and the United Steelworkers of America will soon renegotiate a labor contract for what is expected to be a shrunken work force at the plants.
WL Ross, however, will not take over costs of pension and benefits for the more than 80,000 LTV retirees. This could set a precedent for several other bankrupt steel companies, including Bethlehem Steel Corp.
The union, however, welcomed the deal, describing WL Ross as a "new ally" in its quest to save steelworkers' jobs in the United States.
"This deal, if the president follows through on his commitments to the steel industry, will save the jobs of many steelworkers at LTV," said United Steelworkers president Leo Gerard.
Rodney Mott, a former executive of Nucor Corp., one of the largest U.S. steel companies, would head the reorganized LTV. Some of the other executives would also be from Nucor.
For Wilbur Ross, who heads WL Ross, is already familiar with LTV. He was on the creditors' panel that helped the company emerge from bankruptcy in the early nineties.
Before creating WL Ross, he and his team were with the Rothschild investment bank, where they helped restructure more than $200 billion of liabilities before buying out the practice.
The firm has revamped troubled businesses at Revlon , Trans World Airlines, Trump Plaza and the Bank of New England. Recently, it led a bid for Korean financial group Hyundai Securities, along with American International Group before the insurer pulled out.