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
10, 2005 edition
By Naomi
Powell
The Hamilton Spectator
(Nov 10, 2005)
A new group of Stelco creditors are
jockeying for the power to kill the company's restructuring plan.
Stelco's convertible noteholders, a
separate group of creditors from the bondholders threatening to vote down the
company's plan, asked the Ontario Superior Court yesterday to move them into a
separate voting class.
If placed in a new class, the
noteholders, who are owed $90 million by Stelco, would have the power to veto
any restructuring plan. Justice James Farley has reserved his decision on the
motion.
Offering a rare glimpse into the
behind-the-scenes negotiating leading up to the Tuesday vote, Andrew Kent, a
lawyer for the noteholders, called the talks "unfair.
"The company has been talking
about giving us less," he said. "We want the same as everybody else
or we want the power to choose our own destiny."
To be approved, Stelco's restructuring
plan must have the support of creditors representing two-thirds of a every
voting class. Stelco has put all of its creditors into one class and has
focused its efforts on winning over the most powerful group in the class, the
bondholders.
If another class of voters is added for
the convertible noteholders, the steelmaker would be faced with the added task
of winning two-thirds approval from that group.
"By having fewer classes, Stelco
improves its chances of getting the plan through," said Bruce Leonard,
president of the Insolvency Institute of Canada. "The more classes, the
more chances there are for dissent. And it would be unusual for Justice Farley
to approve a plan with a dissenting class of creditors."
The convertible noteholders want out of
the class of creditors partly because of the relationship it places them in
with the bondholders.
Technically, the convertible
noteholders are subordinate to the bondholders. As a result, if the bondholders
are not paid the full $275 million they are owed by the company, they have the
right to take noteholders' compensation away.
"I don't think Farley will approve
(the request)," said Leonard. "Especially when he's so close to a
solution."
Stelco and the bondholders opposed the
motion on the basis that the plan is only intended to affect rights of
creditors as against Stelco (not between themselves) and on the basis that
there should not be a separate class.
npowell@thespec.com
905-526-4620