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 14,, 2005 edition
By Steve Arnold
The Hamilton Spectator
(Oct 14, 2005)
Union leaders continued to rally
support for a Stelco restructuring deal yesterday.
But they also made it clear they're
willing to push for a sale of the company if bondholders block a plan to save
the steelmaker.
It's all part of what leaders of the
United Steel Workers call a "carrot and stick" package.
The carrot will be negotiated over the
next month as the company moves toward a Nov. 15 creditor vote. It will involve
offering bondholders something more than the current plan's shares-for-debt
swap.
The stick, as laid out in a May legal
document, is a proposal to ask bankruptcy court Justice James Farley to permit
Stelco to be sold without the approval of creditors. Details of both were
outlined yesterday in meetings with The Spectator's editorial board and
unionized retirees.
In a court filing, union adviser Ron
Bloom said that, without a negotiated settlement, "the paralysis plaguing
the process will likely only harden and, with the passage of time, recoveries
for stakeholders will likely continue to diminish. Against this backdrop, any
alternative must be given serious consideration by the court."
The plan being backed by the union and
Stelco is based on money to be borrowed from Tricap Management Inc. and the
provincial government. It would put $400 million against Stelco's $1.3 billion
pension deficit and pay the balance off over 10 years. It would also leave
Stelco with up to $758 million in debt after restructuring, $550 million of
which could be converted to shares.
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, paying the balance off over a decade and
allowing $450 million of debt which could be converted to shares.
In a meeting with The Spectator, the
union leaders argued the bondholder's plan puts too much debt onto Stelco at
terms that are too tough for a company struggling to regain its balance. They
also accused bondholders of trying to "terrorize" Hamilton.
"I predict the bondholders are
going to do everything they can to terrorize the people of Hamilton to get what
they want," said Bill Ferguson, president of the Stelco Lake Erie local.
Ferguson said those tactics may include defeating the Stelco plan in a first
vote.
The union has frequently attacked
"New York speculators" for buying Stelco bonds in the weeks following
its filing for creditor protection, usually at discounts of up to 80 per cent
off face value. Those bonds are trading in the range of 70 per cent today,
meaning the holders have already made hefty profits but are demanding more than
they would recover under the Stelco-Tricap plan.
Pension funding has always been at the
heart of the Stelco restructuring for the union, a concern that was voiced
again at an afternoon meeting of retirees who expressed their anger at the
company and the government for allowing the deficit to develop.
Many supported Local 1005's persistent
demand that the provincial government lend Stelco $1 billion to solve the
pension problem.
Hamilton city council Wednesday night
endorsed the Tricap plan and released an open letter calling on creditors to be
fair in their demands.
sarnold@thespec.com
905-526-3496