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 May 3, 2005 edition
By Steve Arnold
The Hamilton Spectator
(May 3, 2005)
Stelco's board of directors has
received a restructuring plan outline from its bondholders, just as small
shareholders start a quiet push to save their little piece of the steel-making
giant.
The company has also found a buyer for
its Welland pipe mill which has been sitting idle since 2003.
The bondholders plan was delivered late
last week as an alternative to the $1.35-billion rescue package offered by
Brascan Corporation's restructuring arm. Where the broad outlines of the
Brascan plan have been widely discussed, however, the details of the
debtholders' plan remain a closed book.
"We want a good discussion about
this and we think we've started a good discussion," said bondholders'
lawyer Richard Orzy. "We think we're offering a fair and appropriate way
of dealing with things."
Orzy added the bondholders don't expect
to file details of their proposal with the court, but do expect quick action on
their proposal from Stelco.
The bondholders' group had promised to
file a plan of its own after flatly rejecting the Brascan proposal which
offered existing creditors $100 million in cash plus shares in a new Stelco. It
also promised $500 million as a downpayment on Stelco's crippling $1.3-billion
pension deficiency. Bondholders, who own Stelco's unsecured debt, vowed to
defeat any plan that compromised their debentures.
Stelco's board is also being petitioned
by small shareholders for a representative to press their cause in the
company's restructuring.
"An awful lot of small
shareholders are out there and they're virtually without representation,"
said shareholder Doug Pollitt, analyst with Toronto-based Pollitt and Co. Inc.
"Shareholders are paying for everyone else's representation but have no
representation of their own."
Stelco's small shareholders, unlike
debtholders, active and retired employees, don't have advisers and lawyers
financed by the company. Large stock owners have two representatives on the
board of directors and its important restructuring committee.
Normally, when companies file for
bankruptcy protection, shareholders can expect to lose their entire investment
-- that's exactly what Stelco warned would happen in the weeks following its
filing. Most recently the company has said there might be something left for
shareholders because current high steel prices have allowed the company to post
profits.
"Shareholders are generally the
first to take a haircut in these situations," Pollitt said. "They are
a very vulnerable group. We're getting phone calls all the time from investors who
are genuinely scared and they deserve some representation."
Last year Pollitt & Co. was behind
a court motion against the controversial $900-million Deutsche Bank deal,
arguing that plan severely undervalued the company and did nothing to fix the
pension deficiency and cost of production problems that led Stelco into
protection in the first place.
In a new report filed yesterday
Stelco's court-appointed monitor announced a deal has been reached with
Grinolet Inc., to sell the equipment of the idled pipe mill in Welland.
Stelco will got to court tomorrow to
ask for an order allowing the sale.
The Welland pipe operation was closed
in March 2003.
sarnold@thespec.com
905-526-3496