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
15, 2005 edition
By Naomi
Powell
The Hamilton Spectator
(Nov 15, 2005)
Stelco continued to negotiate with
bondholders last night as the steelmaker scrambled to save its hard-won
restructuring plan before a key vote today.
The wrangling is expected to continue
right up to the moment creditors cast their ballots.
"In contentious cases like Stelco,
the negotiations can continue right through the day to the very second the vote
is cast," said Stephanie Ben-Ishai, a University of Toronto law professor
with a special interest in insolvency and restructuring. "Things happen at
the last minute. Anything can happen."
Stelco's bondholders have vowed to veto
the restructuring deal, which would see an immediate $400 million payment on
the steelmaker's $1.3 billion pension shortfall. A no vote could force the
steelmaker to come up with another restructuring plan.
It could also compel Justice James
Farley to order all stakeholders into last-ditch negotiations to save the deal.
Neither the bondholders' lawyers nor
Stelco CEO Courtney Pratt were available for comment yesterday. Stelco
spokesperson Helen Reeves would only confirm that talks were taking place.
The all-day vote at Mississauga's
International Centre is the latest hurdle for the company's restructuring plan.
Forged in marathon negotiations between Stelco and its unions in September, the
plan has the support of all key stakeholders except for the bondholders,
Stelco's largest group of unsecured creditors. Without their support, the deal
will crumble.
"It will be really interesting,
from a strategic standpoint, to see how Stelco will swing this," said
Bruce Leonard, chair of the Insolvency Institute of Canada. "And it will
be equally interesting to see who shows up to vote."
Stelco brass including Pratt and Hap
Stephen, the company's chief restructuring officer, will be present for the vote.
Union leaders -- with the exception of
Local 1005 president Rolf Gerstenberger -- will await the results in their
Toronto office.
But no one is sure how many, if any,
bondholders, will attend.
Until now, Stelco's bondholders have
remained largely unknown.
Only a few names -- New York City's
Sandell Asset Management, Longacre Management LLC and Owl Creek Asset
Management LP -- have trickled out in court filings. And their anonymity could
remain intact.
Representatives of the U.S. hedge funds
that own bonds were in Toronto last night for a final round of negotiations.
But creditors had the option to vote on the plan by proxy, sending a form to
the company's court-appointed monitor by 5 p.m. yesterday. They can also
appoint someone to vote on their behalf.
"Still, I think you may see some
of the bondholders show up," Leonard said. "Their holdings are big
enough that it could happen."
Five separate classes of voters -- one
each for Stelwire, CHT Steel, Welland Pipe, Stelpipe and Stelco creditors --
will register before casting their votes by ballot. Stelco creditors are
scheduled to vote last at 2 p.m.
The plan has to win the support of
creditors representing two-thirds of the total debt owed by Stelco -- about
$640 million. The plan must also receive the support of two-thirds of creditors
present at the vote. All rules surrounding the vote will be laid out in advance
by court-appointed monitor Alex Morrison of the accounting firm Ernst and
Young.
But delays, last-minute bargaining and
brinksmanship can often delay votes or even force postponement.
"At this point in the game,
everybody knows each other's hands," said one Toronto insolvency lawyer
who asked not to be named. "But votes can still be pushed late into the
night while people negotiate. Sometimes it ends in a simple adjournment.
Sometimes people end up screaming and shouting at each other. In Stelco's case,
I think it'll be something in between. It'll be tense, certainly."
If a last-minute agreement is reached,
Stelco's restructuring plan can be amended on the spot so that a vote can go
ahead. Once votes are cast, a scrutineer can tabulate and present the results
within an hour.
As it stands now, the deal offers
bondholders 66 cents for every dollar they are owed. But most of that
compensation is in the form of secured and unsecured notes or equity in the
steelmaker. That estimate is loosely based on what Stelco shares and notes will
be worth on the market once the company hauls itself out of nearly 21 months of
bankruptcy protection. The bondholders want something more tangible.
"They want cash," said Marvin
Ryder, a business professor at McMaster University's DeGroote School of
Business. "That's going to have to come from someone."
The question is who? Stelco's unions
aren't likely to give up any of the $400-million bailout or offer up
concessions to save the deal. And Pratt has said there is not enough value in
Stelco to please everyone.
That's left Ryder and other analysts to
speculate that the province, which would be on the hook for millions if
Stelco's pension plans were wound up, may eventually come up with the money
necessary to win over the bondholders.
"Frankly, I could see the province
tossing in another $100-million loan," Ryder said.
"It's definitely not
inconceivable."
npowell@thespec.com
905-526-4620
The vote by the numbers
8 a.m.
The hour a continental breakfast
is scheduled to begin.
3
The number of pastry varieties to be
served, including: danishes, muffins
and croissants.
30 to 35
The number of wraps and sandwiches
to be served to the Stelco contingent.
$640 million
The total amount of money owed
to Stelco's unsecured creditors.
$275 million
The amount owed to Stelco's
senior bondholders.
2/3
The number of favourable votes needed
to approve Stelco's plan.
20
The number of months Stelco has spent
in bankruptcy protection.
400
The seating capacity in the
International Centre's French Room, where the vote
will be held.