ALGOMA STEEL ANNOUNCES MAJOR MILESTONE IN FINANCIAL RECAPITALIZATION.

SAULT STE. MARIE, ONTARIO--(BUSINESS WIRE)--April 27, 1995-- Algoma Steel Inc. announced today that it has achieved a major milestone in its financial recapitalization by reaching an agreement for the refinancing of the preferred shares of Algoma's subsidiary, Algoma Finance Corp.

Algoma has entered into an agreement with a number of institutions which together hold approximately 76 percent of Algoma Finance's outstanding preferred shares whereby each institution has agreed to support a refinancing transaction which would result in the exchange of $262.4 million Algoma Finance preferred shares (which will remain outstanding after the scheduled April 30, 1995 redemptions) for cash and securities of Algoma.

The terms of the exchange provide that, subject to certain conditions, each preferred share will be exchanged for $9.60 in cash, $8.5876 of Algoma First Mortgage Notes and 0.6875 Algoma common shares, with a contingent value right attached to each common share issued. The terms of the exchange are described in greater detail in the attached appendix.

In commenting on the proposed transaction, Allan Hopkins, President and Chief Executive Officer of Algoma, said, "The agreement with Algoma Finance's preferred shareholders will enable Algoma to proceed with its financing plans to strengthen its balance sheet and facilitate the Company's strategic facilities plan."

"Algoma Finance's preferred shares were issued in conjunction with Algoma's restructuring in 1992 and have been an attractive source of capital for Algoma since that time. A number of the terms of the preferred shares, however, make them an inappropriate source of capital for the future. As a healthy and highly profitable steel company, more permanent and conventional debt and equity now better suit our capital structure".

As previously announced, Algoma recently approved a new strategic plan which includes the construction of a state-of-the-art thin slab caster linked to a new hot strip mill as well as other strategic investments totalling $500 million.

The financing plan for Algoma's strategic capital expenditure program is now expected to involve a U.S. public offering of approximately U.S. $250 million of First Mortgage Notes and a public offering of common shares in Canada and the U.S. of approximately Cdn. $150 million, in both cases including Notes and shares issued to preferred shareholders in the recapitalization. In addition, the Company is negotiating a new and expanded operating loan facility.

The public offerings together with anticipated internally generated funds are expected to be sufficient to fully fund the capital cost of the thin slab caster and hot strip mill. All aspects of the financing plan are expected to be completed by June 30, 1995. Heine Securities Corp., a U.S. investment adviser managed by Michael Price, controls, through its advisory clients, approximately 28 percent of the outstanding preferred shares and is one of the institutions which has agreed to the exchange transaction. Mr. Price stated, "This is a great transaction for the future of Algoma. The refinancing of the preferred shares will enable Algoma to finally get the recognition it deserves as the most profitable steel company in North America".

Algoma Steel Inc., based in Sault Ste. Marie, Ontario, is Canada's third largest integrated steel producer. Revenues are derived primarily from the manufacture and sale of rolled steel products, including hot and cold rolled sheet and plate, seamless tubular products and structural products. The Company's common shares and the preferred shares of its subsidiary, Algoma Finance Corp., trade on The Toronto Stock Exchange under the symbols ALG and AFC.PR.A., respectively.

CONTACT: Jim Garner, Director of Corporate Finance

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