Shares of Co-Steel Inc. tumbled 18 per cent on Friday, a day after the company said it was in breach of its debt covenants.

The stock fell $1.40 to close at $6.

As of March 31, 2001, the company breached its loan covenant with its lenders, which resulted in approximately $270 million of long-term debt being reclassified to current debt. Co-Steel revealed the problem on Thursday when it unveiled its first quarter financial results.

The company said it is continuing with discussions with its senior lenders to revise its credit agreements. The firm had $32.6 million of cash on hand as of the end of March.

A company spokesperson on Friday said talks with the lenders were going well and Co-Steel expected it would be able to restructure its debt arrangements without having to sell non-core assets. The spokesperson added that the company was now up-to-date on its interest payments.

A mini-mill steel producer, Co-Steel posted a $53.1 million loss in the quarter, a large drop from the $13.2 million profit the company reported in the same period a year earlier.

On a per-share basis, Co-Steel's loss amounted to $1.78 per share. Its profit a year ago was 39 cents per share.

Co-Steel reported steel shipments of 611,000 tons in the quarter, down from 736,000 tons for the same period in the prior year. The company's revenue for the first quarter was $266.7 million, down from $345.6 from the first quarter of 2000.

"High-energy costs, unfairly priced imports, a slowing U.S. economy and a harsher than normal winter, forced the company to reduce production at all of its facilities in order to lower inventory levels," Terry Newman, Co-Steel's president and CEO, said.

The company said the loss for the current year includes a write down of the its investment in ASW Plc of $18 million.

Co-Steel also reported an operating loss of $20.3 million in the first quarter at its Co-Steel Lasco plant related to the three-month lockout of 460 unionized employees at the Whitby, Ontario facility.

Co-Steel is just the latest North American steel maker to report poor results. Algoma Steel filed for creditor protection last month.

The Canadian government has accused more than a dozen countries of dumping steel at illegal prices.