Geneva Steel, a Vineyard, Utah-based steel mill company operating under Chapter 11 proceedings, is seeking a new $250 million credit facility and is in talks with potential lenders. "The new loan will finance incremental investment in Geneva and refinance an existing loan," said Ken Johnsen, president and ceo. "We're talking to a lot of banks, and one bank is doing due diligence right now." He declined to name the banks or provide a timeframe for when a decision will be made. In addition to financing Geneva's turnaround strategy, the loan would repay a $110 million Citibank-led term loan. He declined to say whether Citi is in the running, what the pricing might be and what the pricing is on the existing line. Johnsen could not provide a date for exit from Chapter 11, but this will not be for some time.
Geneva, like other U.S. steel operators, is attempting to change strategy in order to survive long term, and the loan will finance the transition called the electric arc furnace strategy, Johnsen commented. "The primary cause of Geneva's problems goes back to 1998, when an import surge caused a 30% price volume drop," he argued, adding this caused a liquidity crisis. "Going forward the strategy is to transform from being an integrated mill to one that also works with mini-mills."