It was one day after President Bush announced a package of 30% tariffs aimed at rescuing the ailing steel industry that is coping with depressed prices, tough competition and high costs for worker pensions. The Bush plan didn’t address the industry’s struggle with how to meet its pension and benefit obligations – despite the industry’s request he do so.
National Steel, which is 53% owned by Japan’s NKK Corp., said it had a tentative agreement for up to $450 million of debtor-in-possession financing with its existing senior bank group, subject to court approval.
One analyst told Reuters that the bankruptcy filing was no surprise, given National Steel’s high pension costs and the fact that Bush’s plan didn’t offer any relief.
Companies Had Asked for Government Pension Help
Several large steel companies recently broached the idea of government-supported consolidation of those pension and benefit obligations as part of an overall rescue plan for the industry.
“With that kind of ‘no’ out there (on the pension issue), I guess they decided to file for bankruptcy,” said Michael Gambardella, a J.P. Morgan analyst. “I don’t think they had much cash left.’
The company said it will continue to discuss a potential merger agreement with United States Steel Corp. as well consider other alternatives. A spokesman for US Steel said the company is still interested in the acquisition.
In the filing in the US Bankruptcy Court for the Northern District of Illinois, the company listed $2.3 billion in assets and more than $2.6 billion in debts. National Steel is the country’s fifth largest steel company and one of the largest US producers of carbon flat-rolled steel, shipping about six million tons annually, mainly to car and appliance makers.
Its main creditors include HSBC Bank USA, Mitsubishi Corp., Marubeni Corp., EES Coke Battery Co. Inc. and J.P. Morgan Chase. Forty-one National Steel subsidiaries also filed for bankruptcy.
LTV Filed Bankruptcy in 2001
National Steel follows LTV into bankruptcy court. LTV, the nation’s third-largest integrated steel company, sought protection in December. More than 28 US steel companies have sought bankruptcy protection since late 1997.
The steel industry has presented the Pension Benefit
Guaranty Corporation (PBGC) with some of its largest
liabilities on a historical basis (see A Table of the Top
10 Pension Fund Failures ). The PBGC takes over traditional
pension plans from their bankrupt or ailing companies and
continues the plan’s payments to workers.