By Mike Boyer
The Cincinnati Enquirer

United States Steel Corp. today sweetened its bid for National Steel Corp., putting more pressure on a competing offer from Middletown's AK Steel Holding Corp.

The battle for Mishawaka, Ind.-based National, one of the nation's largest producers of flat-rolled steel, comes to head Wednesday when National, which sought Chapter 11 bankruptcy protection a year ago, conducts an auction of its assets. A bankruptcy hearing to confirm the sale is set for April 21.

Pittsburgh-based U.S. Steel increased its National offer Friday to $975 million, including $775 million in cash and assumption of $200 million of National's liabilities.

That's more than the $950 million offered previously including $200 million in liabilities and up to $100 million in U.S. Steel stock and the balance in cash. In bankruptcies, creditors typically prefer cash for assets rather than stock and other securities.

U.S. Steel also has a tentative agreement with the United Steelworkers of America which represents about 6,500 of National's 8,200 employees, something AK Steel, designated lead bidder by National, has been unable to get.

AK Steel, which would double its size if it acquired National, has offered to pay $1.13 billion including $925 million in cash and the $200 million assumption of liabilities.

Citing its inability to come to terms with the Steelworkers, AK Thursday indicated it would ask National to abrogate its labor agreement with the union under provisions of the bankruptcy law.

That raised the ire of the union, which Friday threatened a strike at National plants, if the company accepted AK Steel's proposal.

U.S. Steel's tentative labor agreement covers Steelworkers at both its plants and those owned by National and would run through 2008. It would also mean elimination of 5,700 jobs at both companies.

But Leo Larkin, industry analyst with Standard & Poor's, said the labor uncertainty around AK's proposal coupled with its own highly leveraged balance sheet suggests U.S. Steel has the upper hand.

AK, which built a new finishing mill in Rockport, Ind., in 1998 and acquired Armco Inc., in 1999, has about $125 million in debt coming due this year and next, he said.

"If you add it all up, it seems to me, U.S. Steel is more likely to prevail,'' he said.

AK Steel's shares closed Friday at $3.74, up a cent. U.S. Steel closed at $11.57, up 7 cents.

E-mail mboyer@enquirer.com.