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
19, 2005 edition
By NAOMI
POWELL
The Hamilton Spectator
(Jul 19, 2005)
It's time for the provincial government
to "step up to the plate" when it comes to Stelco's massive pension
deficit, a bankruptcy court judge said yesterday.
"The province is not going to
shift off its responsibility," Justice James Farley told a lawyer for the
province yesterday. "I want you to take the message directly up the
street."
Stelco's $1.3 billion pension shortfall
is largely attributed to the company's decision to take advantage of the
so-called "too big to fail clause."
Created in 1992 by the former NDP
government, the clause exempted large companies with pensions over $500 million
from funding their plans up to the level necessary to pay out all pensions in
case of bankruptcy.
The companies would be so large,
proponents of the clause argued, that they would never be allowed to collapse.
For Stelco, which took advantage of the
clause in 1996, it was a disaster.
The company has since built a
$1.3-billion pension deficit that has become a mammoth stumbling block
throughout its 18 months of bankruptcy protection.
"Too big to fail does not mean
they're not going to fail," Farley told Ben Zarnett, a lawyer for the
province yesterday. "It's certainly been an active player, now it's time
for the government to step up to the plate." Farley did not say what he
expects the government to do next.
In February, the government informed
Stelco that it would no longer be permitted to take advantage of the clause
once it had emerged from creditor protection. It also said it would not
contribute any funding toward paying off the deficit.
It has instead thrown its support
behind a union-backed restructuring plan that would see significant dollars
invested in the shortfall.
The proposal from Tricap Management, an
arm of the Brascan Corporation, would invest
$500 million into the pension, paying
the rest off over the next six years.
"People will suffer if this
problem remains unsolved," said Zarnett.
"I take it the province will also
suffer," Farley shot back.
The judge criticized the government and
its special steel adviser James Arnett for allowing a recent letter expressing
its support for a union-backed restructuring plan to become public. The letter,
which was sent to the union, was subsequently leaked to the media.
All stakeholders in the Stelco drama
were ordered to keep their correspondences confidential throughout the rest of
the restructuring.
Richard Orzy, a lawyer for Stelco's
bondholders, also had sharp words for the government.
"It's allowed Stelco to just
postpone its payments," Orzy said. "Now it's like a parent who spends
many years without asking a child to clean its room and then complains that
it's dirty."
npowell@thespec.com
905-526-4620