The Stel Salaried Pensioners Organization wishes to
thank The Hamilton Spectator for permission to post the following article by
Reporter Steve Arnold published in the October 13, 2005 edition
By STEVE
ARNOLD
The Hamilton Spectator
(Oct 13, 2005)
Stelco's restructuring plan faces a
critical court challenge tomorrow.
The company's bondholders have a
hearing before the Ontario Court of Appeal to decide how and when their
challenge of the plan will be heard.
Lawyer Rob Staley, acting for the
bondholders, said in an e-mail exchange that the hearing could result in
directions from the court on when the appeal will be scheduled and heard.
News of the hearing came as Stelco's
unionized pensioners were preparing for a meeting today to learn details of the
plan to settle the pension shortfall.
The plan the bondholders want to
scuttle would put $400 million against the $1.3-billion deficit and pay the
balance off in annual amounts of $60 million for five years and $70 million for
five years. It would also leave Stelco with up to $758 million in debt after
restructuring, $550 million of which could be converted to shares. The plan is
to be financed with $450 million from Tricap Management Inc., $100 million from
the province and new debentures.
Bondholders, who are owed about $275
million, favour a plan that loads debt of $883 million onto Stelco, putting
$300 million on the pension shortfall and paying the balance off with annual
payments of $70 million for five years and $80 million for five years. Asset
sales would finance
$100 million of the pension down
payment and $450 million of debt could be convertible under the plan.
Bondholders control enough of Stelco's
$660 million in unsecured debt to give them an effective veto over any plan. A
vote is tentatively set for Nov. 15.
In court documents, the bondholders
raise four objections to the Stelco plan:
- The $400 million pension down payment
is excessive.
- The plan dilutes existing creditors'
interests/
- No competing bids were sought.
- Ontario shouldn't get a veto over
appointments to the board of directors.
Matthew Heckler, vice-president and
director of Wexford Credit Opportunities Fund, a New York firm that owns or
controls more than $26.6 million in Stelco bonds, argues in an affidavit the
plan "does not represent an equitable or even reasonable sharing of 'pain'
associated with a successful restructuring ... Simply put, the creditors ...
are being sought to be used as the ladder on which other stakeholders climb out
of Stelco's insolvency."
In an ad in yesterday's Spectator,
union leaders argued: "The only relevant opposition to this plan is coming
from the company's financial creditors, who would rather see the cash that is
targeted for the pension fund go into their bank accounts. While this plan
offers them a fair deal ... they have made it clear that they want more."
There are two critical differences
between the plans -- the bondholder vision would put up to $200 million more
debt on Stelco, while taking an extra $100 million off the company's bottom
line to settle the pension deficit.
"Everybody is on board with this
plan and the only real outstanding difference is that $200 million," said
union leader Bill Ferguson.
The Stelco plan is also opposed by
leaders of Local 1005 of the steelworkers union, who see "enormous
risks" in the debt it imposes on the company.
The pensioners' meeting is at 3 p.m. at
Carmen's, 1520 Stone Church Rd.E.
sarnold@thespec.com
905-526-3496