Financial Management: Emergency Steel Loan Guarantee Program

This report discusses the Emergency Steel Loan Program, which provides loan guarantees to qualified steel producing companies. GAO found that there has been only one guaranteed loan disbursed by a private lender for $110 million. With an 85 percent guarantee, the federal government's potential loss is $93.5 million, assuming no repayments and no recovery from property pledged as collateral. The financial condition of program applicants is not strong, and repayments of loans depend upon many future factors. Economic analysis indicates a flat demand for steel, moderate prices, and static imports of foreign steel forecasted for 2002 and 2003. Because of the low loan amount, the program has had a minimal overall effect on the U.S. steel industry through March 2001.