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 July 8, 2005 edition
By Naomi
Powell
The Hamilton Spectator
(Jul 8, 2005)
The Ontario government has thrown its
support behind a union-backed bid to take over Stelco.
This surprise move marks one of the
first signs of movement in discussions to restructure the steelmaker, which saw
its mediation talks collapse recently after 17 months of bankruptcy protection.
Government backing comes in a letter
sent to the United Steelworkers and to Stelco's president and CEO, Courtney
Pratt, by Jim Arnett, Premier Dalton McGuinty's special adviser on the steel
industry.
Arnett says the bid by
Brascan-controlled Tricap Management addresses the government's key concerns
about finding a viable restructuring plan and fixing Stelco's $1.3 billion
pension deficit.
"I am instructed to advise you
that the province would be prepared to provide support for the plan,"
Arnett writes.
"At present, the plan you have
proposed is the only one, of which we are aware, which has the potential to
address the province's concerns and we will work with you to pursue stakeholder
consensus."
But the letter warns the government's
support is not exclusive and it will still consider alternative plans if they
arise.
Employee groups have long backed
Tricap's bid because it proposes putting $500 million toward the pension
shortfall and paying out the remainder over five years, as legislation
requires.
The Tricap plan was rejected in May by
Justice James Farley.
He ordered all stakeholders to use the
company's own plan as a starting point for mediation talks under retired judge
George Adams.
The company plan would see it put $175
million into its $1.3 billion pension shortfall and raise $642 million by
selling shares, issuing new debt and selling non-core operations.
The mediation talks collapsed at the
end of June when Adams quit as mediator, citing an inability to forge an
agreement between the company's opposed bondholders, salaried workers, union
and other stakeholders.
"Tricap is the only game in
town," said Bill Ferguson, president of the United Steelworkers' local
representing Stelco's Lake Erie employees.
"I don't see anybody else rushing
to give Stelco money and I don't see any other viable plan.
"The province is saying this is
the best deal. So we're calling on the other stakeholders to get on
board."
But Pratt flatly rejected the Tricap
offer yesterday, saying it is unfair to the company's bondholders.
"We've said for some time that
there are some pretty serious issues with the plan in that it doesn't address
our obligation to be fair to all stakeholders," Pratt said.
"There are bondholders that have a
vote here, too."
Owed more than $275 million, the
bondholders are one of the few Stelco stakeholders who will be required to vote
on a restructuring plan.
They have made it clear they'll defeat
anything that requires them to compromise their debts.
Stelco rejected a number of refinancing
offers in March in favour of exiting bankruptcy on its own by raising money on
the capital markets.
npowell@thespec.com
905-526-4620