WEST CHESTER, Ohio, Oct. 8 AK Steel (NYSE: AKS)said today that it has reached agreement with a group of retirees from itsMiddletown (OH) Works to settle a lawsuit stemming from the company'sinitiatives in 2006 to reduce its retiree health care costs in order toimprove its competitiveness.
The company said the settlement agreement covers about 4,600 currentMiddletown Works retirees. Under terms of the agreement, AK Steel willtransfer all of its health care (OPEB) obligations for the covered retirees toa Voluntary Employees Beneficiary Association (VEBA) trust, which will bemanaged solely by the retirees' designees, and will be utilized to fund theretirees' covered benefits. AK Steel will initially fund the VEBA trust witha contribution of $468 million, with three subsequent annual contributions of$65 million each, for a total of $663 million. In exchange for this funding,AK Steel will have no further liability related to the Middletown Worksretirees covered by the agreement.
The company said that it intends to fund the initial $468 million trustcontribution through one or more sources, including its existing cash balancesand credit facilities; and possibly the capital markets. The company said itexpects the initial trust contribution to occur in the first quarter of 2008.As of June 30, 2007, AK Steel's total OPEB liability was approximately $2.1billion, of which approximately one-half was related to the Middletown Worksretirees covered by the settlement announced today.
AK Steel said the agreement is subject to approval by the U.S. DistrictCourt, Southern District of Ohio, Western Division, in Cincinnati.
AK Steel produces flat-rolled carbon, stainless and electrical steelproducts, as well as carbon and stainless tubular steel products, forautomotive, appliance, construction and manufacturing markets.
SOURCE AK Steel