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 14, 2005 edition
By Steve Arnold
The Hamilton Spectator
(May 14, 2005)
Stelco's
plan to make a $125 million down payment against its massive pension deficit is
being dismissed as a "non-starter" and a "token" by union
and retiree leaders.
At the
same time, the province's steel industry adviser is warning the company will
have to make a strong case to be allowed to cover the deficit over any period
longer than five years.
While
details of the financial restructuring plan released this week remain
officially confidential, some figures are leaking out to negative reaction.
"My
understanding is that it favours the financiers over the retirees and that's a
non-starter for us," said Wayne Fraser, Ontario-Atlantic director of the
United Steelworkers. "Our goal is to see Stelco on a stable financial
footing for the future and this plan doesn't do it."
Sources
say the outline proposes a down payment of $125 million on Stelco's $1.3
billion pension deficit, with the balance to be covered over 10 years.
The
company would raise between $150 million and $250 million in equity and pay off
$150 million in debentures that come due in 2006. The pension down payment
could be increased to over $200 million if Stelco sells subsidiaries, including
Stelwire plants in Hamilton and Burlington.
Stelco
spokesman Helen Reeves refused to confirm or deny any of the figures.
Government
adviser James Arnett said, "We put forward a plan some time ago and we
haven't been able to reach agreement on it."
Arnett
has said a major down payment on the deficit is required, but the amount can be
negotiated. Current law sets a five year deadline for such payments and if more
time is to be allowed, "we would have to see a plan that made us satisfied
that it was, in fact, going to be paid off in the context of a company that was
going to be viable and successful.
"For
us to agree to other than five years would be a concession and I don't think we
would do that if others weren't making concessions," he added.
Paul
Wendling, spokesman for the salaried retirees group, also refused to discuss
the plan's details, but did say the pension down payment is too low. "We
would certainly like to see more there," he said. "Our biggest
concern is to have the deficit paid off as soon as possible and we'd need some
real convincing that it shouldn't be done in less than 10 years."
For
retirees and the union, the Brascan refinancing proposal -- a pension down
payment of $500 million -- remains the standard.
Support
for pensioners was also voiced this week by Hamilton East-Stoney Creek MP Tony
Valeri who declared in a letter to Stelco president Courtney Pratt, "The
pension issues should take priority over the treatment of the unsecured
creditors.
"This
restructuring should not proceed on the basis of jeopardizing the existing and
future pensions of Stelco's employees," he wrote. "Specifically, any
acceptable proposal should include an immediate and substantial down payment on
the pension deficit, combined with a clear plan to address the deficit in the
medium and long term."
The
plan outline is a starting point for negotiations toward a final plan that will
require court approval. Stelco recently rejected a number of refinancing
proposals and is looking to the public markets to raise money. In addition to
the $1.35 billion Brascan proposal, mining company Sherritt International and
the wealthy Ontario Teachers Pension Plan are seeking court permission to table
a plan. A third proposal has been given directly to Stelco's board of directors
by bondholders.
With
steel prices falling, financing expert Michael Locker warns Stelco may have
missed its chance on the markets.
"The
bloom is off steel now, so Stelco is going to have a very tough time raising
money in the equity markets," he said. Locker is a financial adviser to
the union.
sarnold@thespec.com
905-526-3496
With
files from The Canadian Press