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
September 24, 2005 edition
By Naomi
Powell
The Hamilton Spectator
(Sep 24, 2005)
Stelco and its unions snatched a
restructuring deal back from the brink last night when they signed a pair of
collective bargaining agreements less than two hours before the steelmaker's
bankruptcy protection was set to expire.
The collective agreements with
AltaSteel and Lake Erie workers were signed after a furious Justice James
Farley demanded they work at reaching a consensus and held out on extending the
company's creditor protection past midnight last night.
In signing the deals with the unions,
and finalizing the financing deal with Tricap Management Ltd., the company has
met the conditions needed to salvage a $100-million loan from the province -- a
key part of the restructuring deal unveiled Tuesday.
"We're thrilled to get this done.
It's been long and exhausting," Stelco CEO Courtney Pratt said late last
night.
Pratt said Farley had "lit a fire
under our feet."
Asked what Farley would have done if
the company missed the deadline, Pratt added: "I don't want to think about
it."
Farley came to the Toronto office tower
where negotiations were being held last night to witness the signing of the
papers in person. Asked around 10:40 p.m. if he would have pushed the company
into bankruptcy, he looked at his watch and said: "We made it."
"Let's put it this way. I'm going
to play golf tomorrow instead of doing something else."
With the deals reached, Farley extended
the steelmaker's bankruptcy protection until October 4.
That time will be needed for Stelco to clear
the next significant hurdle in its 20-month struggle to exit bankruptcy
protection.
For its restructuring plan to go ahead,
Stelco must have the approval of its bondholders who have already said they
would not support the plan as it stands.
Bondholders are powerful enough to sink
the deal because they are the largest group of unsecured creditors -- the only
group with a vote on the plan.
Between now and the vote -- a date has
not yet been set -- Stelco has the onerous task of convincing the powerful group
the plan is a good one.
Matthew Heckler, vice-president of
Wexford Capital Opportunities Fund, filed an affidavit with the court in which
he called the plan "the tainted product of a negotiation conducted in
secret."
Heckler, whose company controls $26
million of Stelco's debt, criticized the company for not including the
bondholders in negotiations.
Heckler took particular issue with a
vague clause in the restructuring deal, which he interpreted as giving the
province the right to veto any member of Stelco's board of directors.
Given that the company's proposed plan
would cancel existing shares and give 100 per cent of new stock to unsecured
creditors, Heckler said this veto proposition was "simply unreasonable and
inappropriate." If the unsecured creditors own the company, he argues,
they should have more say in determining the board.
Stelco's plan calls for the company to
have between eight and 16 directors, but it does not spell out exactly how they
would be chosen.
Its current board would be terminated
as soon as the company launches its plan. New directors would be named to hold
office for one year or until the next annual meeting.
The bondholders' own plan for
restructuring would see unsecured creditors choose seven of the board members
with the province and Stelco's management deciding one each.
In addition, Heckler criticized the
company plan as one that "doesn't share the pain" of restructuring
equally among stakeholders.
Rather, he says in the documents, it
asks the unsecured creditors to bare it on their own.
Under the current restructuring
proposal, the company would turn $660 million in debt into IOUs and shares in
the company. Creditors would receive no cash.
The plan also calls for a $400-million
down payment on the company's $1.3 billion pension shortfall -- $100 million
from the province and $300 million from the company.
Heckler called this amount excessive
under the circumstances, "particularly when there are no concessions
sought" from the workers.
Although agreements have been signed with
the unions, Lake Erie vice president Peter Leibovitch said his local would not
hold a vote on the collective agreements until bondholders approved a
restructuring plan.
By holding back on the vote, Lake Erie
retains its power to strike -- a significant bargaining chip in the
restructuring process.
Despite the ongoing struggle ahead, the
mood last night was one of celebration after months of work.
Shortly before the deals were signed,
Tony DePaulo, area coordinator for the international arm of the United Steelworkers,
stepped into the elevator in the TD Tower in Toronto where talks took place and
said: "I can't wait. I'm going to have a beer while I wait for my
martini."
npowell@thespec.com 905-526-4620