The Stel Salaried Pensioners Organization wishes to
thank The Hamilton Spectator for permission to post the following article by
Reporter Chinta Puxley, published in the October 7, 2005 edition
By Chinta
Puxley
The Hamilton Spectator
(Oct 7, 2005)
Stelco's bondholders are launching a
court appeal in a bid to derail the steelmaker's restructuring plan.
The steelmaker's largest group of
unsecured creditors is objecting to Justice James Farley's decision this week
allowing the steelmaker to proceed with financing deals with the province and
Tricap Management.
The agreement, which could pave the way
for the company to emerge from bankruptcy protection in December, provides $450
million in financing and a $100 million provincial loan toward the company's
pension deficit.
While the steelmaker, the majority of
its unions and the province endorse the plan, the company has yet to win the
support of the bondholders -- the only group with a vote and enough power to
kill the entire deal.
The bondholders have already said they
will veto the deal in a vote Nov. 15 unless it is significantly changed.
Now the bondholders have taken the step
of appealing the ruling which allows the deal to proceed to a vote.
In a letter to Stelco yesterday,
bondholder lawyer Robert Staley said if their appeal is successful, they will
try to force Tricap and the province to return any money Stelco has paid them
as part of the deal. If the deal fails at this point, Tricap is entitled to a
$10.75 million "commitment fee."
The bondholders, who are not required
to publicly identify themselves, will "vigorously contest" any
attempt to act on the restructuring deal, Staley wrote.
Stelco spokesperson Helen Reeves said
the restructuring deals with the province and Tricap have already been signed.
She said Stelco won't comment further on the appeal until it had seen the court
documents.
The Tricap deal gives unsecured
creditors $225 million in secured convertible notes, essentially IOUs on the
company's assets, and $300 million in the form of unsecured notes which can be
converted into shares.
But most observers say bondholders --
who often buy bonds at a discount when a company is in trouble and then try to
increase the value of their investment during restructuring -- are more
interested in getting money than a stake in the company.
Stanley Kershman, an Ottawa-based
insolvency lawyer, said the bondholders are trying to get a better deal for
themselves by stalling .
He said an appeal was expected since
the bondholders don't want to wait until November to stop the deal.
But the move has angered and frustrated
Stelco union leaders who have been negotiating with the company for 20 months.
They believe they've reached a restructuring deal both sides can live with.
Under virtual threat from Farley,
Stelco and the steelworkers agreed on the Tricap deal at the 11th hour. Next,
Stelco and its unions hammered out collective agreements for its Fort Erie and
AltaSteel workers.
Peter Leibovitch, vice-president of the
United Steelworkers representing Lake Erie employees, wasn't not surprised by
the appeal.
"It's to be expected. It's an
attempt to intimidate a community. The best thing for the community to do is
say we're not going to be intimidated."
Leibovitch said the bondholders are not
interested in whether workers get their pensions or if Stelco survives. The
only thing they care about is getting their money's worth, he said.
But he predicted that bondholders will
not get a better deal.
"The restructuring deal is the
only feasible way to go forward."
cpuxley@thespec.com
905-526-3468