The Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator for permission to post the following article by Reporter Tara Perkins published in the April 14, 2005 edition

Apr. 14, 2005. 01:30 PM

Steelworkers goes to court over bid to help Brascan refinance Stelco

By TARA PERKINS

TORONTO (CP) - The United Steelworkers union is asking a judge to appoint Brascan Corp. as its financial adviser in a backdoor attempt to enable the conglomerate to submit a bid for Stelco Inc.

Late Wednesday, legally insolvent Stelco rejected a $1.35-billion refinancing proposal put forward by a restructuring arm of Brascan in partnership with the Steelworkers. The union will file a motion this week with the court that is overseeing Stelco's creditor protection, Ken Rosenberg, lawyer for the Steelworkers' Pittsburgh head office, said Thursday.

We are asking the court to consent to the appointment of Brascan as our adviser under our confidentiality agreement, he said.

After Stelco (TSX:STE) filed for court protection last January, the Steelworkers union signed a confidentiality agreement allowing it access to the steel giant's books and records, as well as ongoing financial information.

Rosenberg said that if Brascan was made an adviser to the union, it gives them the access they need to undertake the due diligence that they think is necessary.

The motion, which is expected to be heard on April 21, will set the stage for yet another fight between Stelco and its union.

The Hamilton steelmaker's approval of any new financial advisers is needed, Rosenberg said.

Stelco is required to consent, but if they oppose, their opposition shall not be unreasonable. So the question for the court is whether or not Stelco is unreasonably withholding their consent to the appointment of Brascan.

Stelco spokeswoman Helen Reeves said the steelmaker had not yet seen the union's motion.

We need to take a look at it after it's filed, she said.

On Wednesday, chief restructuring officer Hap Stephen said the Brascan deal is not a proposal that we can accept or even deal with. He said it's not a firm offer and is not a deal that Stelco was a party to.

The Steelworkers' tentative arrangement with Tricap Management Ltd., a Brascan restructuring fund, took many observers by surprise Wednesday.

Cyrus Madon, managing partner of Tricap Restructuring Fund, said in an interview Thursday that the fund has had an ongoing dialogue with Stelco's management and other stakeholders.

He said due diligence could be completed in a matter of weeks, with the support of Stelco's management.

Madon took aim at Stephen's comment that Tricap's $1.35-billion proposal is not firm.

The sponsors of the Tricap Restructuring Fund include the Canada Pension Plan Investment Board, TD Bank, CIBC, GE Capital and Brascan, Madon said. We have a very, very credible group of investors behind our fund.

The proposal would include $600 million in a revolving line of credit and a $350-million term loan to Stelco. Tricap would also backstop $400 million of new equity, to be offered to existing stakeholders.

Of the $1.35-billion total, $750 million would be available to Stelco to fund capital expenditures and for general corporate purposes. Tricap would put $500 million directly against Stelco's pension deficit.

While Stelco hammers out its own plan to raise funds and exit protection, another of its rejected suitors - Russian steel giant OAO Severstal - continues to circle the company.

We are continuing to monitor the process, spokesman Ian Blair said Thursday.

Shares in Stelco plunged more than 11 per cent Thursday, trading mid-afternoon at $2.80 on The Toronto Stock Exchange.

Brascan shares (TSX:BNN.LV.A) fell 96 cents, trading at $43.69 per share