The Stel Salaried Pensioners Organization wishes to
thank The Hamilton Spectator for permission to post the following article by
Reporter Naomi Powell published in the June 25, 2005 edition
By Naomi
Powell
The Hamilton Spectator
(Jun 25, 2005)
The resignation of one of the country's
most respected mediators from the Stelco talks has cast a chilling pall over
the steelmaker's future.
Mediator George Adams' resignation
marks not only the collapse of negotiations but also another failure in a long
string of attempts to bring stakeholders together behind a plan to pull the
company out of 17 months of bankruptcy protection.
"George Adams is an extremely
well-regarded mediator," said Joseph D'Cruz, a professor in the University
of Toronto's Rotman School of Business. "He is regarded as one of the best
in the business. If the best in the business can't get them to get their act together,
they're in real trouble."
Following an intense 24 hours of
negotiations, Adams sent a letter to all parties announcing the breakdown of
the month-long talks and urging them to "consider how they might bridge
their outstanding differences."
Adams did not state what problems are
preventing a successful restructuring, but differences over how to rebuild the
company and repay a $1.3-billion pension deficit have long stood between the
bondholders and unions.
"We'll continue to seek a solution
that reflects the needs and interests of all stakeholders," said Stelco's
president and CEO Courtney Pratt. "As I've said for sometime, it's
important that all parties work together and in the same direction so that we
can find a positive outcome."
The decision places the future of
Stelco back in the hands of Justice James Farley, who will preside over the
issue in court on Monday. Farley will decide how to proceed and whether to
grant the company's request for a seventh extension on its protection under the
Companies' Creditors Arrangement Act.
One source inside the talks is doubtful
the extension will bring the opposed parties any closer to an agreement.
"I don't know that more time will
really help," said the source.
The failure of the talks "weren't
for a lack of trying," the source added.
Farley could choose to push Stelco's
stakeholders -- the unions, bondholders, salaried employees and trade creditors
-- into arbitration, said D'Cruz. Unlike the now exhausted mediation process,
which requires both parties to agree on a restructuring plan, an arbitration
would place the decision in the hands of a court-appointed official.
Farley could also impose a
restructuring plan of his own on the company, one that all sides would have no
choice but to accept.
Another option is to order the opposed
stakeholders back into mediation, placing a deadline on them to present a plan
or risk him imposing one.
"The unhappy thing is that a
mediated settlement, one everybody agreed to, would have been best for all
parties," D'Cruz said.
"They have to get their act
together soon because they are losing time."
With the steel market softening and the
uncertainty around Stelco's future growing, the company's buoyant profits won't
last forever, D'Cruz said. This could make the company's plan to raise funds for
restructuring on the capital markets a challenge.
Stelco tossed out numerous refinancing
proposals in favour of its own plan in March, rejecting bids by Russia's OAO
Severstal and Germany's Deutsche Bank. The company's own confidential
restructuring plan, which was the starting point for the talks, was shunned by
unions. They instead backed a plan by Brascan-controlled Tricap Management Ltd.
which would put $500 million into the pension deficiency.
Soaring demand from China has resulted
in unprecedented profits for Stelco -- but it also caused distrust in union
leaders who have questioned whether the profitable company should even be in
bankruptcy protection. The bondholders also came forward with their own
confidential plan.
"I think George Adams would have
been much more successful if the steel industry was in a slump," D'Cruz
said.
"The parties might have seen the
need to compromise then."
npowell@thespec.com
905-526-4620