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 October
4, 2005 edition
By Naomi Powell
The Hamilton Spectator
TORONTO (Oct 4, 2005)
Stelco's largest union has rejected the
company's restructuring deal saying it poses "enormous risks" to the
steelmaker.
The surprise broadside from
steelworkers Local 1005, whose lawyer said she was encouraged by it two weeks
ago, capped a day that left the deal to save the city steelmaker hanging in the
balance.
After hearing fierce opposition from
Stelco's bondholders, Justice James Farley withheld judgment on approving a
$450 million financing deal until this morning. Although court approval by Oct.
3 was a condition of the deal, investor Tricap Management agreed to the brief
extension.
A $100 million loan from the provincial
government and the company's restructuring pact with its unions will dissolve
if the Tricap deal is not approved.
"After 20 months of extremely hard
work and multiple false starts, these deals are inextricably woven," said
David Jacobs, lawyer for the unions representing Lake Erie and AltaSteel
workers. "This is a plan which provides stability going forward."
But Richard Orzy, a lawyer for Stelco's
bondholders, urged Farley not to approve either the Tricap deal or the
company's agreement with the province. Stelco's creditors have repeatedly told
the company that their plan has "no chance of acceptance," he said,
adding that more than 50 per cent of creditors are against it.
If the bondholders reject the plan,
Stelco would be forced to abandon its deal with Tricap, triggering expensive
break fees. The fees are penalties for breaking or backing out of a deal.
"This proposed plan is doomed and
everyone knew it before they submitted it," said Orzy. "If this court
must send this plan to a vote, do it without the baggage of break fees."
The Tricap deal includes a $10.75
million break fee, which Stelco must pay if it backs out of the deal. Earlier
this year, Stelco paid $11 million to Germany's Deutsche Bank when it left a
financing deal. Stelco must also give Tricap $1.6 million to cover legal and
other expenses.
Sharon White, lawyer for Local 1005,
attacked the company's strategy to emerge from bankruptcy protection, saying it
does not address the core problems the company faces and leaves it with too
much debt.
"The risks associated with this
plan are enormous," White said.
Farley interrupted White and said:
"I'll look forward to 1005's proposal for the company's salvation. I've
got the stones, why don't you start building as opposed to throwing."
Local 1005 has refused to take part in
restructuring talks for fear it would lead to concessions on its labour deal,
which expires next summer. President Rolf Gerstenberger called Farley's
comments "very inappropriate."
"We're the ones who make the steel
so we're building everything," he said after. "We had legitimate
concerns to raise. It's far from casting stones."
Bondholders also took a swing at the
Ontario government, accusing the province of "letting someone else take
the heat for putting Stelco in jeopardy."
Stelco's $1.3 billion pension shortfall
has grown since 1996, when the steelmaker took advantage of a clause in the
province's Pension Benefits Act, which allowed it to avoid making certain
payments into the fund.
Earlier this year, the province said it
may no longer allow Stelco to take advantage of the clause, a move Orzy called
"a bombshell threat."
Orzy dismissed Ontario's $100 million
contribution to Stelco's pension debt as "nothing special at all,"
saying the province would be on the hook for the entire sum if Stelco went
bankrupt.
Stelco's plan calls for existing shares
in the company to be wiped out with a new set of shares awarded entirely to the
company's unsecured creditors. The bondholders argue those creditors should
name the board members.
Despite the strong criticism, Stelco
CEO Courtney Pratt said he was still optimistic that, with some amendments, the
plan still has a chance when creditors vote at a meeting tentatively scheduled
for Nov. 15.
"We believe this plan does have a
fighting chance of winning approval."
npowell@thespec.coms
905-526-4620