Metals concern AK Steel Holding is back in the news this morning. The company announced that it has reached an agreement with a group of retirees from its Middletown (Ohio) Works to settle a lawsuit stemming from the company's 2006 moves to cut its retiree health-care costs. The settlement agreement covers about 4,600 current Middletown Works retirees. Under terms of the agreement, AK Steel will transfer all of its health care obligations for the covered retirees to a Voluntary Employees Beneficiary Association trust. AK Steel will initially fund the trust with a 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 Works retirees covered by the agreement.
On Friday, shares of AKS rallied more than 4%, but met with continued resistance at its 10-day moving average. The shares have languished below this short-term trendline since breaking below it on October 3. Overhead resistance at the 45 level has also proved troublesome. However, there is plenty of pessimism (i.e. sideline money) to help drive AKS higher should today's news strike a chord with the bullish investor. According to the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.54, options players have only been more bearish 1% of the time during the past year. Meanwhile, more than 7% of the stock's float is sold short, and could provide fuel for a short-covering rally.