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Thursday, August 23, 2001

By Len Boselovic, Post-Gazette Staff Writer

Beleaguered Weirton Steel, with rapidly diminishing cash, is considering another major restructuring that would eliminate more than 10 percent of its work force, according to sources familiar with the West Virginia steelmaker's operations.

They said the aim of the restructuring was to keep Weirton out of bankruptcy, a fate that already has befallen about two dozen of its competitors. Staying out of bankruptcy would enable Weirton to continue paying supplemental pensions to those already on early retirement and to those who would take it as part of the next wave of cost cuts, the sources said. Those benefits would almost certainly be terminated if the company filed for bankruptcy.

However, the steelmaker's plight is so severe that many industry analysts believe bankruptcy is unavoidable.

"They're not making any money. They have no hope of making any money, and it's not going to turn short term," said Charles Bradford of Bradford Research in New York. "They look really weak. The stock is 45 cents. That tells you a lot. The bonds are in the same neighborhood."

Weirton Steel officials declined to comment on the nature or progress of restructuring discussions. They said Weirton is seeking additional financing, examining ways to reduce operating costs, and considering acquisitions, mergers and other ventures that would provide the spark the company needs.

"We continue to find ways to drive costs out of the company," spokesman Gregg Warren said.

Independent Steelworkers Union President Mark Glyptis also declined to discuss what proposals are being considered.

"Obviously the union's been approached, and we are examining ways of lowering costs," he said. "Every facet of the business is being looked at. We're not any different than Wheeling-Pitt, LTV or others in the industry who have found tough going."

According to sources close to the discussions, Weirton is considering eliminating as few as 500 to more than 700 jobs. The company employs 630 nonunion workers and 3,500 union members. Also on the table is a proposal to sell the company's headquarters complex, which sits on a bluff overlooking the Ohio River mill town.

Besieged by cheap imports and the lowest steel prices in 20 years, Weirton lost $291.1 million in the year's first half on a 22 percent decline in revenue and a 17 percent drop in shipments. The losses included a $12.3 million charge for a 10 percent salaried work force reduction in March and a noncash charge of $153.8 million to acknowledge the fact the company probably won't be profitable enough in the near future to utilize tax benefits it earned from operating losses.

Standard & Poor's rates the company debt CCC, reflecting its opinion that a near-term default is possible unless drastic action is taken.

In a quarterly securities filing last week, Weirton said its liquidity -- the amount of cash and borrowing power it has -- stood at $29.8 million on Aug. 10, down from $55.4 million on June 30 and $131.7 million on Dec. 31. Less than two years ago, Weirton pulled in $180 million from the sale of a 35 percent stake in MetalSite, an e-commerce venture it founded.

"They've now run through all that money," Bradford said.

Glyptis holds out hope that Weirton's concerted effort to win import relief from the Bush administration as well as trade cases brought against foreign steel producers will help get the steelmaker back on its feet.

But Bradford said that, given the way Weirton is running through cash and the industry's meager near-term prospects, the steelmaker's fate may be sealed long before the market turns or Uncle Sam can lend a helping hand.