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
16, 2005 edition
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Apr. 16, 2005. 01:46 AM |
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Union-backed plan would create a
new Stelco |
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By Steve Arnold |
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Creditors at the bottom of the corporate food chain are being offered a chance to trade debts for shares in a new Stelco. That new Stelco could also mean a new board of directors and president if a $1.35-billion Brascan-United Steelworkers proposal to take the company out of bankruptcy protection succeeds. Details of the union-backed plan were released yesterday in court documents backing a Steelworkers request to allow Brascan access to Stelco's most closely-guarded financial secrets. Brascan, through restructuring fund Tricap Management Ltd., has tabled a rescue package designed to end Stelco's 15- month journey through bankruptcy protection. The package was announced Wednesday and instantly rejected by Stelco, which also refused to allow Brascan to be named the union's financial advisor. That would give Brascan access to information released to the union last year under a confidentiality agreement. The union's court motion, expected to be heard Thursday in Toronto, is an effort to clear that hurdle. In an affidavit supporting the motion, union leader Peter Leibovitch said the Steelworkers sought out Brascan because they feared for the future of Stelco. "To date, Stelco's restructuring process has failed to yield any feasible proposals," he said."Despite the passage of 15 months and a number of false starts ... Stelco appears to me to be no closer to emerging from CCAA today that it did at the commencement of the CCAA process. "The USWA has invested considerable time, expense and effort in the restructuring process to date. At this critical stage, when restructuring efforts have been stalled, the USWA believes that it has put forward a meaningful proposal to assist Stelco to emerge from CCAA and that the USWA and (Brascan) must be allowed to explore this proposal further." The letter of intent outlining the broad strokes of the Brascan-union agreement would see the board of directors and the president replaced with new appointees "acceptable to the USWA". It would also see $650 million of unsecured Stelco debt transformed into shares in the new company. At the same time, existing shareholders would be offered some form of equity-backed security such as debentures convertible into new shares. Details of that plan, such as the ratio at which new and old shares would be exchanged, await completion of the due diligence review Stelco is attempting to block. The Brascan package would offer Stelco access to $1.35 billion through $950 million in new debt and a commitment to backstop $400 million of equity-linked securities. The money would be used to put $500 million directly into Stelco's underfunded pension plans, to pay down $100 million of debt and to contribute the balance to needed capital work. The rest of the pension shortfall would be settled in less than 10 years. In exchange, the letter of intent gives Brascan fees for the loans it provides plus $15 million in either warrants or new shares plus the right to buy up to $50 million of the new equity-linked securities at a 7.5 per cent discount. In an interview Steelworkers leader Bill Ferguson, bleary-eyed after 36 sleepless hours stickhandling the proposal while also attending the union's policy convention in Las Vegas, defended the Brascan plan as the only proposal in 15 months that directly attacks the pension problems that led Stelco into protection in the first place. "Stelco seems to be saying the financial speculators are the only ones to be dealt with here," he said. "I'm not worried about the financial speculators, I'm interested in the pensioners." By promising money directly to the pension fund and for equipment upgrades, he added, Brascan "has made some pretty substantial pledges to the things that are important to the company." The Brascan plan is backed by five of Stelco's union locals. Local 1005, representing workers at the Hilton Works complex in Hamilton, is not involved. sarnold@thespec.com 905-526-3496 |