The Stel Salaried
Pensioners Organization wishes to thank The Hamilton Spectator for permission
to post the following article by Reporter Steve Arnold published in the April
15, 2005 edition
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Apr. 15, 2005. 12:53 AM |
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Stelco union heading to court |
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By Steve Arnold |
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Stelco's president says the company is in control of its restructuring process but doesn't yet have a firm plan to solve its crushing debt and pension liability problems. Despite that, Courtney Pratt repeated the insolvent company's refusal to consider a $1.35- billion refinancing plan unveiled Wednesday by the United Steelworkers of America and Toronto-based Tricap Management Ltd., a division of Brascan Corporation. The union will take its plan to court next week to challenge Stelco's refusal to consider the bid. "Our position has to be that the company is driving the process," Pratt said in an interview. "We're committed to developing a plan with the stakeholder groups ... but we're not at the stage where we've come to any decisions yet with respect to the allocation of funds or the specific model that we want." Stelco sought protection from its creditors in January 2004, citing the crushing burden of an unfunded pension liability that was crippling its ability to compete. At the time the company said it expected to run out of money by November 2004. But soaring steel prices gave it a profit of $65 million for the year. The company first said it would solve its problems by selling its subsidiaries and refinancing its core operations. But it rejected the offers and got court approval for its own restructuring through the capital markets. The Brascan plan is conditional on a review of Stelco's books and assets, a review Stelco has refused to permit. In an effort to get around that, the union will file a legal motion asking that Brascan be appointed its financial adviser. That would allow the Steelworkers to share all the information given to them by Stelco under a confidentiality agreement. "That will allow Brascan to become informed and educated about the state of Stelco's business," said union lawyer Ken Rosenberg. "It will give them full and unrestricted access to the books and records of the company." Stelco continues to struggle with how it will balance the demands of shareholders for profits and retirees for the security of their pensions. But one observer says the Brascan proposal offers the first concrete proposal in 14 months to start solving the pension problem. Paul Wendling, spokesperson for Stelco's salaried retirees, said his group likes the Brascan offer because it promises an immediate infusion to the pension plan. "We like it, we like the fact that it addresses the pension deficit with an upfront payment," he said. "I think the bottom line is that the bondholders have turned it down because they don't want to trade any of their debt for equity. Ken Neuman, Canadian director of the USWA, said Stelco doesn't have an alternative to the Brascan proposal. "Stelco's board hasn't been able to come up with a good offer so we put together something from a good company with a proven background," he said. "If the board doesn't support this, they're nothing more than speculators for the bondholders." Stelco has been ordered by the provincial government to cover pension shortfalls of $879 million. It also faces a health benefits plan deficit of $1.35 billion and needs cash for capital work and to cushion it against future declines in steel prices. Brascan has offered Stelco $950 million in new debt facilities, and $400 million of equity backed securities. The plan proposes immediately putting $500 million into Stelco's pension plans, offering $100 million to existing secured creditors and $750 million for capital spending and other uses. Pratt said the "essence" of the Brascan proposal was taken to Stelco's full board of directors and rejected on the grounds it didn't meet the needs of all stakeholders. Lawyer Murray Gold, who represents the retirees, agreed the Tricap plan is the first to offer concrete action on the concerns of pensioners. "This is the first serious proposal we've had to address the pension issue," he said. sarnold@thespec.com 905-526-3496 |