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 30, 2005 edition
By Naomi Powell
The Hamilton Spectator
(Sep 30, 2005)
The major financial backer behind
Stelco's restructuring plan will get approval on the steelmaker's board of
directors in exchange for a minimum $425-million loan.
Tricap Management, the restructuring
division of Brascan Corp., has made approval rights a condition of its
financing deal with Stelco, released yesterday.
The condition further complicates the
question of who will lead Stelco out of 20 months of bankruptcy protection. The
provincial government has demanded approval of the board in exchange for its
$100-million contribution to Stelco's pension shortfall. And the steelmakers'
bondholders are also insisting on control.
In an interview yesterday, chief
financial officer Bill Vaughan said the company had yet to finalize a method
for choosing its directors. The proposed restructuring plan says only that the
current board will be terminated as soon as the plan is launched, with new
directors named for a term of one year.
"We'll consult with all of the
parties and, presumably, we'll be in a position to satisfy everyone," he
said. "We still have ongoing discussions with the bondholders. If they
accept this deal they would hold a significant amount of equity and will want
some say as well."
The Tricap deal would see Stelco
receive a $350-million renewable loan which will be secured to the steelmaker's
assets. Tricap would also insure Stelco's attempt to raise an additional $75
million through the sale of secured notes or IOUs that can be converted to
stock.
If it chooses, Tricap can also purchase
an additional $25 million in convertible notes.
In exchange for the financing, Stelco
will give Tricap $1.6 million to cover legal and other expenses. The steelmaker
will also pay a $10.75 million "commitment fee" which Tricap keeps if
Stelco backs out of the deal.
Matthew Heckler, a bondholder whose
Connecticut-based Wexford Capital Opportunities Fund controls about $26 million
in Stelco debt, took issue with both the Tricap deal and the provincial veto on
the board. The bondholders are the largest group of unsecured creditors, a
group that would be awarded 100 per cent of shares in a new Stelco under the
current restructuring proposal. They have already rejected the proposal.
As the new owners of the company,
Heckler argued in an affidavit, the unsecured creditors should control the
board. He also accused Stelco of making "no meaningful attempt" to
find a more competitive financing deal than the one offered by Tricap.
With so many sides wanting a say in
Stelco's future, finding a board that pleases everyone could be tricky, said
Chris Bart, head of the Director's College at McMaster's DeGroote School of
Business.
"This will have to be a
bullet-proof board if there's that many approvals involved," he said.
"These directors are going to come under tremendous public scrutiny. It'll
be a tough board because everybody will be watching it like a hawk. Given that,
the real question is who would want to serve on this board?"
Rebuilding Stelco into a viable company
and repairing damaged relations with workers won't be easy, Bart said.
"But if someone could pull it off,
it'd be a career-maker. You could write your corporate ticket in Canada."
npowell@thespec.com
905-526-4620