IPO set by ISG to pay debt

Bethlehem Steel's buyer seeks to raise $414 million

Now nation's No. 2 steelmaker

Company to offer shares `as soon as practicable'

November 29, 2003|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

International Steel Group Inc., which bought Bethlehem Steel Corp. in May, hopes to raise as much as $414 million in what could be the first initial public stock offering by a major domestic steelmaker in nearly a decade.

In a filing with the Securities and Exchange Commission on Wednesday, ISG said it plans to use the proceeds of the sale to pay down debt incurred from its $1.5 billion acquisition of Bethlehem. ISG took ownership of the Sparrows Point steel mill in Baltimore County as part of the acquisition.

Cleveland-based ISG has grown into the second-largest steelmaker in the country in less than two years by buying up the plants of bankrupt steel producers across the nation. It says it plans to compete globally by keeping production costs down, which it has done in part by paring corporate staff and management jobs and by reaching collective bargaining agreements that allow it to cut job classifications.

ISG, which had said in a previous SEC filing in August that it planned to raise $250 million, said it expects to sell the stock at $22 to $24 per share.

Company officials could not be reached for comment yesterday.

The steelmaker said in its filing that the offering would be made "as soon as practicable after this registration statement becomes effective."

The company said it will offer 15 million shares of common stock, which would be sold on the New York Stock Exchange.

Terms of one of the company's credit facilities require it to use all net proceeds from the offering to repay the outstanding balance, $228.4 million as of Sept. 27.

ISG was formed early last year by WL Ross & Co. LLC to acquire and run globally competitive steel plants. The company has grown by acquiring the assets of bankrupt companies LTV Corp. in April 2002, Acme Steel Corp. in October 2002 and Bethlehem Steel in May. After the stock offering, two funds, whose general partner and manager are WL Ross, would own a combined 33.8 percent of the outstanding common stock on a fully converted basis.

In the period that ended Dec. 31, 2002, ISG had net income of $68.1 million on sales of $933.1 million. For the nine months that ended Sept. 27, 2003, ISG had a net loss of $48.5 million on net sales of $2.65 billion, the company said in its SEC filing.

On a pro forma basis, which shows the combined performance of ISG and the Bethlehem acquisition, ISG had net sales of $3.7 billion and net income of $169.7 million in 2002, the filing said. On the same basis, ISG had net income of $48.8 million for the first nine months of 2003 on sales of $3.89 billion, the company said.

When it first proposed the IPO, in the filing in August, analysts had said that the company would be undertaking the stock offering against a backdrop of cautiously upbeat prospects for the long-troubled domestic steel industry.

The last major domestic maker of raw steel to hold an IPO - AK Steel Corp., based in Middletown, Ohio - raised more than $700 million in 1994.

But the domestic steel market worsened in the late 1990s. Since 1997, approximately 30 steel companies have filed for bankruptcy protection, and some have been absorbed by healthier rivals such as ISG and U.S. Steel Corp.

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