================================================================= NATIONAL STEEL BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2002 (ISSN XXXX-XXXX) March 7, 2002 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- NATIONAL STEEL BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. Each issue is prepared by Peter A. Chapman, Editor. Subscription rate is US$45 per issue. Any re-mailing of NATIONAL STEEL BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO NATIONAL STEEL BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF NATIONAL STEEL CORPORATION [00002] CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2001 [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] NATIONAL STEEL CHAPTER 11 DATABASE [00005] LIST OF THE DEBTORS' 50-LARGEST UNSECURED CREDITORS [00006] DEBTORS' MOTION TO OBTAIN $450,000,000 OF DIP FINANCING KEY DATE CALENDAR ----------------- 03/06/02 Voluntary Petition Date 03/21/02 Deadline for filing Schedules of Assets and Liabilities 03/21/02 Deadline for filing Statement of Financial Affairs 03/21/02 Deadline for filing Lists of Leases and Contracts 03/26/02 Deadline to provide Utilities with adequate assurance 05/05/02 Deadline to make decisions about lease dispositions 06/04/02 Deadline to remove actions pursuant to F.R.B.P. 9027 07/04/02 Expiration of Debtor's Exclusive Plan Proposal Period 09/02/02 Expiration of Debtor's Exclusive Solicitation Period 03/05/04 Deadline for Debtor's Commencement of Avoidance Actions Organizational Meeting with UST to form Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO NATIONAL STEEL BANKRUPTCY NEWS ----------------------------------------------------------------- NATIONAL STEEL BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of NATIONAL STEEL BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving NATIONAL STEEL BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 24 Perdicaris Place Trenton, NJ 08618 Telephone (609) 392-0900 Fax (609) 392-0040 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990, starting with Federated Department Stores. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) NATIONAL STEEL BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of NATIONAL STEEL BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF NATIONAL STEEL CORPORATION ----------------------------------------------------------------- National Steel Corporation 4100 Edison Lakes Pkwy. Mishawaka, IN 46545-3440 Telephone (219) 273-7000 Fax (219) 273-7579 http://www.nationalsteel.com National Steel Corporation (NYSE: NS) is one of the largest producers of carbon flat-rolled steel products in the United States. The company ships nearly six million tons of steel annually, generates roughly $2.5 billion in annual revenue, and employs some 8,400 workers. National Steel has been in existence for over 70 years, having been formed through the merger of Great Lakes Steel Corporation, Weirton Steel Corporation and Hanna Iron Ore Company and incorporated in 1929. National Steel grew steadily in the following decades both by building new facilities and through acquisitions. In 1983, National Steel became a wholly owned subsidiary National Intergroup, Inc., which subsequently changed its name to FoxMeyer Health Corporation and then to Avatex Corporation. In 1984, NKK Corporation, one of the largest steel companies in Japan and in the world (as measured by production), acquired a 50% equity interest in National Steel from Avatex Corporation. Collectively, National Steel Corporation and its affiliates compose one of the largest integrated steel producers in the United States. The Company manufactures and sells a wide variety of flat rolled carbon steel products, including hot-rolled, cold- rolled, galvanized, tin and chrome plated steels. National Steel has an annual steelmaking capacity of 6.8 million tons, and annual finishing capacity of 7.4 million tons. National Steel estimates it has an 11% market share in the flat rolled steel market. Customers are primarily from the automotive, construction, and container industry as well as those that purchase unfinished steel sheet products. Over 80% of the National Steel employees are represented by the United Steelworkers of America or other labor organizations, and their respective employment terms are governed by various collective bargaining agreements. The Company is headquartered in Mishawaka, Indiana, near South Bend. The Company has three principal facilities: * two integrated steel plants, -- the Granite City facility in Granite City, Illinois, and -- the Great Lakes facility in Ecorse and River Rouge, Michigan; and * a finishing facility, the Midwest Division, in Portage, Indiana, near Chicago. Approximately 70% of the Company's customers are located in the central region of the United States where the Company operates. National Steel's operations are primarily carried out through the parent company National Steel. However, significant and strategically important operations are carried out through several subsidiary corporations. The Company is also involved in certain strategic joint ventures to aid in targeting high value-added finished steel applications. These (non-debtor entities) include: * Tinplate Holdings, Inc.; * Double G Coatings Company, L.P. (together with its general partner Double G Coatings, Inc.); * DNN Galvanizing Limited Partnership (together with its general partner DNN Galvanizing Corporation); * National Robinson LLC; * Mathies Coal Company; * N Squared Aviation LLC; * Pilot Knob Pellet Company; and * Steel Health Resources LLC. Over 53% of National Steel's common stock is owned by NKK U.S.A. Corporation, a wholly owned affiliate of NKK, and the balance is publicly held and listed for trading on the New York Stock Exchange. Shares owned by NKK U.S.A. control approximately 69% of the voting rights of all National Steel common stock. Through various agreements, the Company uses a wide range of NKK's steelmaking, processing and applications technology, as well as certain engineers and other technical support personnel. "Domestic steel producers are operating in the worst steel environment in 20 years," William E. McDonough, National Steel's Vice President and Treasurer, says. "This environment is characterized by historically low steel prices, excess supply due to the dumping of low-priced steel by foreign producers, leading to high end user inventories, and weak demand tied to the overall poor economic climate and recent recession." Mr. McDonough says that, over the past year, National Steel has proactively taken steps to manage through this climate and to maintain liquidity by reducing costs, managing discretionary expenditures, monetizing nun-core assets, and shifting product sales, to the extent possible, to higher margin, value-added steel products. Despite these efforts, the chapter 11 restructuring is necessary for the Company to (a) obtain necessary additional liquidity, (b) continue to operate its businesses and (c) to implement a financial and operational restructuring in order to maximize the value of their businesses for the benefit of all stakeholders. ----------------------------------------------------------------- [00002] CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2001 ----------------------------------------------------------------- NATIONAL STEEL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS At December 31, 2001 (Unaudited) Assets Cash and cash equivalents $3.800,000 Receivables - net 224.200,000 Inventories 390.400,000 Other 15.500,000 Deferred tax assets 3.200,000 -------------- Total current assets 637.100,000 Property, plant and equipment - net 1,385.300,000 Other assets 285.200,000 -------------- $2,307.600,000 ============== Liabilities and Stockholders' Equity Current liabilities $714.600,000 Long-term debt 809.700,000 Other long-term liabilities 1,094.000,000 -------------- Total Liabilities 2,618.300,000 Stockholders' Deficit (310.700,000) -------------- $2,307.600,000 ============== ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- National Steel Files Chapter 11 to Facilitate Financial Restructuring - Agreement in Principle for $450 Million in DIP Financing - Operations to Continue as Usual Without Interruption MISHAWAKA, Indiana -- March 6, 2002 -- To facilitate a restructuring of its operations and balance sheet and ensure sufficient liquidity to continue to grow its business, National Steel Corporation (NYSE: NS) announced today that it has filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. The Company also announced that it has reached an agreement in principle for up to $450 million in debtor-in- possession (DIP) financing with the existing senior secured bank group subject to court approval which, combined with other actions, the Company believes will provide sufficient liquidity to fund post-petition operating expenses. The Chapter 11 filing will also provide National Steel with the necessary time to stabilize the Company's finances and to develop a plan of reorganization to return the Company to sustained profitability. National Steel's Chairman and Chief Executive Officer Hisashi Tanaka emphasized that the Chapter 11 process will have no impact on the Company's abilities to fulfill its obligations to its customers. "Daily operations of our facilities will continue as usual, and our employees will continue to be paid and receive benefits without interruption," Mr. Tanaka said. He added, "During the restructuring period and beyond, we are committed to providing the high-quality products and services that our customers have come to expect and do not anticipate missing any deliveries to our customers as a result of these actions. Going forward, we will continue to meet the needs of our existing customers and expect to obtain new business. "Our vendors will be paid for all goods and services provided after the filing date. With our DIP financing and the protections provided under the Bankruptcy Code for post-petition purchases, we are confident our suppliers will continue to support us while we complete our restructuring." Mr. Tanaka said that the continued depressed selling prices realized by the Company on many of its products during the last two years, coupled with the weak overall United States economy and the record levels of steel imports, have negatively impacted the Company's operating results. "While our core business is operationally sound, historically low steel prices and a weak economy have impeded the Company's ability to service its debt and make investments in the business necessary for continued growth. Our employees have been diligent in reducing costs during these difficult times. In 2001 alone we reduced our costs by approximately $150 million compared to the prior year, our manpower reductions totaled about 1,000, and inventory reductions exceeded $130 million. These are not new actions. We have a continuous improvement philosophy with regard to our cost structure. However, I am very disappointed that all of these efforts have not been enough to overcome the injury to us and the steel industry caused by the lingering effects of the record levels of unfairly traded steel imports and the downturn in the economy that have depressed steel prices," Mr. Tanaka said. National Steel is the latest of more than 28 American steel companies to seek bankruptcy protection since late 1997, as the U.S. industry fights to survive what it terms an onslaught of inexpensive imported steel. During the Chapter 11 process, National Steel expects to continue to discuss a potential merger agreement with U.S. Steel, as well as to look at other alternatives that may be available through the restructuring process. National Steel and its wholly-owned subsidiaries voluntarily filed petitions for reorganization under Chapter 11 in the United States Bankruptcy Court for the Northern District of Illinois. ----------------------------------------------------------------- [00004] NATIONAL STEEL CHAPTER 11 DATABASE ----------------------------------------------------------------- Lead Debtor: National Steel Corporation Bankruptcy Case No.: 02-08699 Chapter 11 Petition Date: March 6, 2002 Debtor affiliates filing separate chapter 11 petitions: Case No. Entity -------- ------ 02-08697 Granite City Steel Company 02-08698 National Materials Procurement Corporation 02-08700 American Steel Corporation 02-08701 Mid Coast Minerals Corporation 02-08702 National Casting Corporation 02-08703 National Steel Pellet Company 02-08704 D W Pipeline Company 02-08705 Midwest Steel Corporation 02-08706 National Coal Mining Company 02-08708 Natland Corporation 02-08707 Granite Intake Corporation 02-08709 National Coating Limited Corporation 02-08710 NS Holdings Corporation 02-08713 Great Lakes Steel Corporation 02-08712 Peter White Coal Mining Corp 02-08711 National Coating Line Corporation 02-08714 NS Land Company 02-08715 The Hanna Furnace Corporation 02-08716 National Mines Corporation 02-08718 Procoil Corporation 02-08717 NS Technologies Inc 02-08719 Hanna Ore Mining Company 02-08720 National Ontario Corporation 02-08721 NSC Realty Corporation 02-08722 Puritan Mining Company 02-08723 Ingleside Channel & Dock CO 02-08726 NSL Inc 02-08724 National Ontario II Limited 02-08727 Rostraver Corporation 02-08728 Ingleside Holdings L P 02-08729 Natcoal Inc 02-08725 National Pickle Line Corporation 02-08730 Skar-Ore Steamship Corporation 02-08731 Ingleside Point Corporation 02-08732 National Acquisition Corporation 02-08733 National Steel Funding Corporation 02-08734 The Teal Lake Iron Mining Company 02-08735 National Caster Acquisition Corp 02-08736 National Caster Operating Corp 02-08737 Liberty Pipe And Tube Inc 02-08738 National Steel Corporation [a New York corporation] Court: United States Bankruptcy Court Northern District of Illinois Eastern Division 219 South Dearborn Chicago, IL 60604 Telephone (312) 435-5694 Bankruptcy Judge: The Honorable John H. Squires Debtors' Bankruptcy Counsel: Mark A. Berkoff, Esq. Piper Marbury Rudnick Wolfe 203 North LaSalle Street Chicago, IL 60601 Telephone (312) 368-4000 Fax ( Debtors' Special Counsel: David S. Kurtz, Esq. Timothy R. Pohl, Esq. Skadden, Arps, Slate, Meagher & Flom 333 West Wacker Drive Chicago, IL 60606 Telephone (312) 407-0700 Fax (312) 407-0411 Debtors' Financial Advisor: Frank A. Savage Lazard Freres & Co. 30 Rockefeller Plaza New York, NY 10020 Telephone (212) 632-6000 United States Trustee: Ira Bodenstein Sandra Rasnak Roman L. Sukley Office of the United States Trustee 227 West Monroe Street, Suite 3350 Chicago, IL 60606 Telephone (312) 886-5785 Fax (312) 886-5794 ----------------------------------------------------------------- [00005] LIST OF THE DEBTORS' 50-LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ HSBC Bank USA, as Trustee Notes $300,000,000 Under Eleventh Supplemental Indenture to Indenture of Mortgage and Deed of Trust (9 7/8% Series due 2009) Russ Paladino 452 Fifth Avenue New York, NY 10018 Phone: (212) 525-1324 Fax: (212) 658-5973 Mitsubishi Corporation and Project Financing $76,024,000 Marubeni Corporation as Lenders for Granite City Continuous Center Loan Mitsubishi Corporation Attn: Richard Prescott 520 Madison Avenue, 20th Floor New York, NY 10022 Phone: (212) 605-2655 Fax: (212) 605-4708 Marubeni Corporation Attn: Soichi Yamamoto 450 Lexington Avenue New York, NY 10017 Phone: (212) 450-0403 Fax: (212) 450-0755 HSBC Bank USA, as Trustee Notes $60,000,000 under Ninth Supplemental Indenture to Indenture of Mortgage and Deed of Trust (8 3/8% Series due 2006) Attn: Russ Paladino 452 Fifth Avenue New York, NY 10018 Phone: (212) 525-1324 Fax: (212) 658-5973 Mitsubishi Corporation and Project Financing $55,849,000 Marubeni Corporation as Lenders for Pickle Line Loan Mitsubishi Corporation Attn: Masakazu Sakakida 520 Madison Avenue, 20th Floor New York, NY 10022 Phone: (212) 605-2194 Fax: (212) 605-4708 Marubeni Corporation Attn: Soichi Yamamoto 450 Lexington Avenue New York, NY 10017 Phone: (212) 450-0403 Fax: (212) 450-0755 EES Coke Battery Co. Inc. Trade $23,162,898 Attn: Legal Department 425 Main Street Suite 201 PO Box 8614 Ann Arbor, MI 48104 Phone: (734) 302-4810 Fax: (734) 994-5849 JP Morgan Chase as Indenture Notes $10,500,000 Trustee for Pollution Control Bonds Attn: Jim Freeman 450 West 33rd Street 15th Floor New York, NY 10001 Phone: (212) 946-3067 Fax: (212) 946-8158 Jewel Coal & Coke Co. Inc. Trade $6,011,238 Attn: Dale Walker U.S. Route 460 West Vansant, VA 24656 Phone: (865) 558-3206 Fax: (865) 558-3280 Tube City, Inc. Trade $2,900,000 Attn: Joe Curtin 12 Monongahela Avenue P.O. Box 2000 Glassport, PA 15045 Phone: (412) 678-6141 Fax: (412) 678-2210 Praxair Inc. Trade $1,646,378 Attn: Legal Department 39 Old Ridgebury Road Danbury, CT 06810 Phone: (800) 772-9247 Fax: (800) 772-9985 Air Products Manufacturing Trade $1,504,258 Corp. Attn: Robert Cratin 7201 Hamilton Boulevard Allentown, PA 18195 Phone: (313) 849-4204 Fax: (313) 849-4330 Metal Building Components LP Trade $1,502,948 c/o Doublecote Attn: Robert Medlook P.O. Box 84036 Dallas, TX 75284-0326 Phone: (281) 897-7788 Fax: (281) 477-9675 Sloss Ind. Corp Trade $1,189,447 Attn: Legal Department 3500 35th Avenue N P.O. Box 5327 Birmingham, AL 35207 Phone: (205) 808-7916 Fax: (205) 808-7715 Bearing Headquarters Co. Trade $1,189,447 Attn: Legal Department 2550 South 25th Avenue Broadview, IL 60155 Phone: (708) 681-4400 Fax: (708) 681-4462 PCI Enterprises Co. Trade $980,412 DTE Energy Attn: Kent MacCarger 425 S. Main Street PO Box 8614 Ann Arbor, MI 48104 Phone: (734) 913-2090 Fax: (734) 994-5849 Spectra Resources Trade $905,202 Attn: Louis J. Huber 1 Middlebrook Dr. St. Louis, MO 63141 Phone: (314) 872-3471 Fax: (314) 872-3016 Portside Energy Trade $722,922 Attn: Legal Department 8407 Virginia Street Southlake Complex Merriville, IN 46410 Phone: (219) 763-7426 Fax: (219) 647-6341 ESM II LLP Trade $722,922 Attn: Charles F Wright 300 Corporate Parkway 216N Amherst, NY 14226 Phone: (716) 446-8900 Fax: (716) 446-8911 Noble Metal Processing Attn: Rick Attonen 20530 Hoover Road Detroit, MI 48205 Phone: (313) 839-0104 Fax: (313) 245-4841 Edward C. Levy Co. Trade $676,352 Attn: Legal Department 8800 Dix Avenue Detroit, MI 48209 Phone: (313) 843-7200 Fax: (313) 849-9444 Roll Coaster, Inc. Trade $627,838 Attn: Don Eber 4502 Freedom Way Weirton, WV 26062 Phone: (304) 794-3001 Fax: (304) 794-3002 Reference Metals Co. Inc. Trade $537,686 Attn: Paul Dimtoff 100 Old Pond Road Bridgeville, PA 15017 Phone: (800) 646-2486 Fax: (412) 221-7355 Quality Rolls Inc. Trade $537,686 Attn: Steven J. Markovitz 1101 Muriel Street Pittsburgh, PA 15203-1151 Phone: (724) 431-8250 ext. 0022 Fax: (412) 431-9017 VitalSi Trade $472,018 Attn: Gregory G. Meta 15200 Huron Street Taylor, MI 48180 Phone: (734) 246-8250 Fax: (734) 246-8209 Caterpillar World Trading Trade $472,018 Corp Attn: Legal Department 100 NE Adams Street Lt. 6321 Peoria, IL 61629-6321 Phone: (309) 494-0516 Fax: (734) 479-1299 B&D Machine Works Trade $463,875 Attn: Legal Department 307Pickneyville Road Marissa, IL 62257 Phone: (618) 295-2112 Fax: (618) 295-2465 Great Lakes Service Trade $451,229 & Sales Inc. Attn: Legal Department 12525 Hale Street Riverview, MI 48192 Phone: (734) 281-6787 Fax: (313) 281-6834 Vesuvius USA Trade $411,884 Attn: Connie Warfel 1404 Newton Drive Champaign, IL 61824 Phone: (217) 351-8402 Fax: (217) 351-8477 Cognex Corp. Trade $411,234 Department 05867 Attn: Mark Cornell P.O. Box 39000 San Francisco, CA 94139-5867 Phone: (570) 876-6740 Fax: (570) 876-3742 BSI Alloys Inc. Trade $393,300 Attn: Legal Department 4955 Steubenville Pike Pittsburgh, PA 15264-3191 Phone: (412) 471-7972 Fax: (412) 787-4727 Detroit Lime Co. Trade $393,287 Attn: Legal Department 125 South Dix Street Detroit, MI 48217 Phone: (313) 849-9268 Fax: (313) 849-9444 Monarch Welding & Energy Trade $390,711 Inc. Attn: Charles Long 23538 Piewood Warren, MI 48091 Phone: (313) 841-7373 Fax: (810) 849-9088 Heraeus Electro-Nite Co. Trade $375,247 Attn: Bob Kuball 9901 Bluegrass Road Philadelphia, PA 19114 Phone: (215) 464-4200 Fax: (215) 698-7793 Fleetwood Peter Co. Inc. Trade $370,694 Attn: Dan Abrell 2222 Windsor Court Addison, IL 60101 Phone: (630) 268-9999 Fax: (630) 268-9919 Philip Metals Inc. Trade $369,920 Luria Brothers Attn: Don Forioni 9700 Higgins Road Suite 750 Rosemont, IL 60018 Phone: (216) 752-4000 Fax: (216) 752-9562 H&P Technologies Inc. Trade $366,793 Attn: Anthony E. Lesha Jr. 21251 Ryan Road Phone: (586) 758-0100 Fax: (586) 758-0589 DA Stuart Co. Trade $359,919 Attn: Brad Donat 4580 Weaver parkway Warrenville, IL 60555 Phone: (630) 393-0833 Fax: (630) 393-0834 DTE Smith Branch LLC Trade $335,155 Attn: Barry Markowitz 414 S. Main Suite 600 Ann Arbor, MI 48104 Phone: (734) 302-4810 Fax: (734) 668-8647 Safety Today Inc. Trade $329,265 Attn: Gary LaForrest 6999 Metroplex Romulus, MI 48174-0708 Phone: (734) 302-4810 Fax: (734) 668-8647 Stand Up for Steel Trade $323,050 Coalition Attn: Margaret Ayres Davis, Polk & Wardell 1300 I Street N.W. Washington, DC 20005 Phone: (202) 962-7142 Fax: (202) 962-7111 Lenhardt Tool & Die Co. Trade $319,389 Attn: Marcia York 3100 East Broadway PO Box 279 Alton, IL 62002 Phone: (618) 462-1075 Fax: (618) 462-0493 Lehigh Heavy Forge Corp. Trade $303,600 Attn: Al Robertson 1275 Daly Avenue Bethlehem, PA 18016-7699 Phone: (610) 694-4125 Fax: (610) 694-5357 DTE Coal Inc. Trade $299,497 Attn: Barry Markowitz 414 S. Main Suite 600 Ann Arbor, MI 48104 Phone: (734) 302-4810 Fax: (734) 668-8647 Arch Coal Inc. Trade $294,949 Attn: Sam Louis City Place One Suite 350 St. Louis, MO 63141 Phone: (314) 994-2803 Fax: (314) 944-2719 Premier Elkhorn Coal Trade $288,222 Company Attn: Legal Department 3597 Antilles Drive Lexington, KY 40509 Phone: (606) 639-3154 Fax: (606) 523-4250 Eramet Trade $287,777 Attn: Angela Parise PO Box 400449 Pittsburgh, PA 15268-0449 Phone: (412) 262-8747 Fax: (412) 262-8762 Stein Steel Mill Trade $282,159 Services, Inc. Attn: John Russo PO Box 470548 Cleveland, OH 44101-2199 Phone: (440) 526-9301 Fax: (440) 526-9230 Pyro Industrial Services Trade $281,195 Inc. Attn: Ben Houser 6610 Shepherd Avenue PO Box 237 Portage, IN 46368 Phone: (219) 787-5700 Fax: (219) 787-0700 Pointe Energy Ltd. Trade $280,588 Attn: Robert D. Galeota 18530 Mack Avenue Suite 296 Gross Pointe farms, MI 48236 Phone: (313) 884-2679 Fax: (313) 884-1055 Renold Inc. Trade $280,028 Attn: Janice Northrop 100 Bourne Street Suite 2 Westfield, NY 14787-9706 Phone: (716) 326-3121 Fax: (716) 326-6121 Mississippi Lime Co Trade $274,269 Attn: Legal Department 7 Alby Street PO Box 2247 Alton, IL 62002 Phone: (618) 465-7741 Fax: (618) 465-7786 ----------------------------------------------------------------- [00006] DEBTORS' MOTION TO OBTAIN $450,000,000 OF DIP FINANCING ----------------------------------------------------------------- National Steel is the Borrower under a Prepetition Credit Agreement dated September 28, 2001, with a consortium of lenders led by Citicorp USA. National Steel Pellet Company, National Steel Funding Corporation, NS Holdings Corporation and ProCoil Corporation are guarantors of National Steel's obligations under the Prepetition Credit Agreement. The Prepetition Credit Agreement provided the Debtors with a $450 million revolving credit facility, with availability limited by a borrowing base based on the value of eligible receivables and inventory, restrictions on concentrations of certain receivables and a liquidity reserve. At the Petition Date, the Debtors owe $310,000,000 under the Prepetition Credit Agreement. The Debtors' obligations under the Prepetition Credit Agreement are secured by a lien on, and security interest in, substantially all of the Debtors' personal property, including inventory and accounts receivable. National Steel is also the Borrower under an Amended and Restated Subordinated Credit Agreement dated September 28, 2001, with NUF LLC, which is a wholly owned subsidiary of NKK. National Steel Pellet Company, National Steel Funding Corporation, NS Holdings Corporation and ProCoil Corporation are guarantors under the NUF Credit Agreement. At the Petition Date, National Steel owed $100,000,000 under the NUF facility. The Debtors' obligations under the NUF facility are secured by a junior subordinated lien on, and security interest in, the same property as pledged to the Prepetition Lenders. The Debtors need a continued source of working capital financing to continue operating in chapter 11. Without access to new financing the Debtors will be unable to operate their businesses, obtain goods and services, meet customer obligations, obtain continued trade credit, and attracting new business will he hindered. Prior to the Petition Date, William E. McDonough, National Steel's Vice President and Treasurer, relates, the Debtors solicited postpetitton financing proposals from various lenders, including certain of the pre-petition lenders. No lender National Steel knows about is willing to extend new unsecured credit. Lenders laughed when asked to extend credit secured by liens junior to the Prepetition Lenders. The Debtors therefore determined, in the exercise of their sound business judgment, Mr. McDonough related, that debtor-in-possession financing, secured by super-priority post-petition liens, is the only kind of financing available in these circumstances. More importantly, DIP Financing addresses the Debtors' working capital needs. After vigorous and lengthy, arm's-length, and good-faith negotiations, the best deal the Debtors found was a proposal by Citicorp USA to roll-up the Prepetition Facility into a New DIP Facility. The salient terms of the New DIP Facility are: Borrower: National Steel Corporation Guarantors: All of the Borrower's direct and indirect wholly owned domestic operating subsidiaries. Lenders: Citicorp USA, Inc., and other financial institutions. The DIP Facility: A $450,000,000 revolving credit facility, providing access to: $25,000,000 on an interim basis to meet current cash needs; and $90,000,000 to back letters of credit. Maturity Date: The earliest of: (1) the second anniversary of the Closing Date, (2) the effective date of a Plan of Reorganization; and (3) an unremediated event of default. Availability: Availability under the DIP Facility is subject to a Borrowing Base calculated by applying advance rates to eligible accounts receivable and eligible inventory, a reserve for the Carve-Out described below, and a $35,000,000 Liquidity Reserve, less al prepetition amounts owed under the Prepetitipn Credit Agreement. Purpose: Proceeds of the Postpelition Loans under the DlP Facility will be used solely to pay certain pre-petition claims approved by the Bankruptcy Court, for post-petition operating expenses, and certain other costs and expenses of administration of the bankruptcy cases. All cash received by the Borrower or any of its subsidiaries will be applied to outstanding claims under the Prepetition Credit Agreement and after all prepetition amounts have been repaid, cash is applied to outstanding obligations under the DIP Facility. Interest: Postpetition Loans will bear interest, at the option of the Borrower, at: (1) Citibank N.A.'s fluctuating Alternate Base Rate plus 2.5%; (2) 3.5% above LIBOR, adjusted for reserve requirements, if any, and subject to customary change of circumstance provisions; In the event of a default, the Interest Rate increases by 2% per year. Fees: The Debtors agree to pay the DIP Lenders a variety of fees: * a $4,500,000 Facility Fee; * an annual $25,000 Agency Fee; * an annual $100,000 Administrative Fee; * an annual $250,000 Collateral Monitoring Fee; * 1/2 of 1% per year on every dollar borrowed as an Unused Commitment Fee; * 3.25% Letter of Credit Fees; and * so-called Deferred Fees, not to exceed $550,000, determined on a sliding scale by a reference to the average Availability during January and February 2003 with the maximum amount of the fee payable if the average Availability is less than $60,000,000 and no fee payable if the average Availability is more than $80,000,000. Asset Sale Covenant: The Debtors agree that amounts received from asset sales, insurance recoveries and condemnation proceedings will be turned over to the DIP Lenders immediately to reduce any amounts owed under the Prepetition Credit Agreement or the DIP Facility. Priority: All amounts owing by the Borrower under the DIP Facility are accorded superpriority administrative claim status pursuant to 11 U.S.C. Secs. 503(b) and 507(b), subject only to the Carve-Out. Carve Out: The DIP Lenders agree to a $7,000,000 carve-out of their liens to permit payment of professional fees incurred by the Borrower, the guarantors and any statutory committees appointed in these Cases, U.S. Trustee fees payable under 28 U.S.C. 1930 and any fees owed to the Bankruptcy Clerk. Security: All amounts owing by the Borrower under the DTP Facility are be secured by security interests in and liens on all assets (tangible, intangible, real, personal and mixed) of the Borrower and the Guarantors, whether now owned or hereafter acquired (including, subject to entry of the Final Order, causes of action arising under Chapter 5 of the Bankruptcy Code), including, without limitation, accounts, inventory, equipment, capital stock in subsidiaries, investment property, instruments, chattel paper, real estate, leasehold interests, contracts, patents, copyrights, trademarks and other general intangibles, and all products and proceeds thereof, subject to the Carve-Out, pursuant to 11 U.S.C. Secs. 364(c)(2) and 364(c)(3). Ford R. Phillips, a Managing Director at Ernst & Young Corporate Finance LLC, tells Judge Squires that he's been intimately involved in the DIP Financing negotiations since January 3, 2002. Mr. Phillips is convinced that the Debtors need the money to survive and that Citicorp is offering the Debtors the best deal available. *** End of Issue No. 1 *** ------------------------------------------------------------------------- Peter A. Chapman peter@bankrupt.com http://bankrupt.com ------------------------------------------------------------------------- Recommended Reading: Professor Stuart Gilson's newest title, "Creating Value Through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups." List Price: $79.95 -- Discounted to $55.96 at http://amazon.com/exec/obidos/ASIN/0471405590/internetbankrupt -------------------------------------------------------------------------