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
November 3, 2005 edition
By Naomi
Powell
The Hamilton Spectator
(Nov 3, 2005)
Stelco forged ahead with a deal to sell
a trio of subsidiaries to global steel giant Mittal Steel on the same day it
waded into a court battle with its bondholders.
The court had not ruled on the
bondholders' bid to appeal Stelco's refinancing deals late last night. But the
steelmaker yesterday announced the sale of Stelwire and two other operations to
the world's largest steel producer.
The sale, expected to close by early
2006, will see Mittal Canada Inc. take ownership of Stelwire's Hamilton and
Burlington operations as well as Stelfil and Norambar, both in Quebec. The deal
must still get court approval. Mittal may trim the workforce at Stelwire, which
employs about 280 people, said Scott Duvall, president of the United Steelworkers
representing Stelwire's Hamilton employees.
"We're going to restructure, so
yes, there could be a loss of jobs, but the union is hoping it will be by
attrition," Duvall said. "Stelco was not willing to invest in our
company. We've got some new life in it now and a new company willing to make us
competitive."
Stelwire's Hamilton employees have been
working without a collective agreement since August.
Although a price for the deal with
Rotterdam-based Mittal was not released yesterday, Stelco hoped to raise $175
million through the sale of the three subsidiaries as well as Edmonton based
AltaSteel, which was not part of the deal.
The steelmaker wants to focus on its
core operations in Nanticoke and Hamilton, using the cash from the sale to help
fund its exit from nearly 21 months of bankruptcy protection.
"This marks an important step in
the process of pursuing a transaction that would be good for all
concerned," Stelco chief executive Courtney Pratt said in a release
yesterday. "We're committed to working with Mittal to conclude a
definitive agreement as quickly as possible."
Official word of the deal came as
Stelco awaited a decision from the Ontario Court of Appeal on whether it will
hear an appeal of a pair of financing deals crucial to its restructuring plan.
The bondholders have accused Justice
James Farley of overstepping his authority by approving a $100-million loan and
a $450-million refinancing deal with Tricap Management, especially when he knew
the bondholders intended to vote the plan down at a meeting on Nov. 15.
A "no" vote on the plan would
trigger payment of one half of a $10.75-million break fee to Tricap Management.
Robert Staley, a lawyer for the bondholders, told the court in Toronto
yesterday that the fee could unfairly influence creditors to vote for the plan.
Asked by Justice John Laskin why the bondholders did not just oppose the Nov.
15 vote, Staley replied: "This company is not going to take the wishes of
its creditors seriously unless a plan put forward is voted down."
Outside the court, Pratt said a
successful appeal could seriously damage any progress made in this latest
chapter of Stelco's restructuring.
To be put into action, Stelco's
restructuring plan must win the votes of those representing at least two-thirds
of the estimated $660 million in claims held against the company. As Stelco's
largest group of unsecured creditors, holding about $275 million in debt, the
bondholders wield enough power to kill any deal.
They have already said that Stelco's
plan, which gives them 66 cents for every dollar of debt, isn't enough.
Stelco's shareholders, whose
investments are almost completely wiped out under the plan, have joined the
bondholders in their appeal. In court documents, they argue that Stelco, which
made unprecedented profits even while under bankruptcy protection thanks to
record steel prices last year, should have something left over for them.
Pratt called the shareholder losses
"unfortunate ... But in a situation where the creditors don't get full
recovery, there's just nothing left for the shareholder."
In other developments, United
Steelworkers Local 1005, representing workers at Hamilton Hilton works,
released their own restructuring proposal yesterday. In a press release
yesterday, 1005 president Rolf Gerstenberger calls on provincial and federal
governments to loan Stelco about $1 billion to pay off its creditors and
shareholders. The money would also go toward Stelco's $1.3-billion pension
shortfall.
npowell@thespec.com
905-526-4620