The Stel Salaried
Pensioners Organization wishes to thank The Hamilton Spectator for permission
to post the following article by Reporter Meredith Macleod, published in the
November 15, 2005 edition
By Meredith Macleod
The Hamilton Spectator
(Nov 15, 2005)
A group of Stelco shareholders will try
to convince a bankruptcy court judge that they are being unfairly shut out of
the company's restructuring.
A motion to be presented to Justice
James Farley tomorrow will ask the court to hear from former Stelco director
Michael Woollcombe about how the board valued the company. By under-estimating
the steelmaker's earnings, shareholders allege they lost any chance of getting
any money out of the restructuring.
Shareholders are the last to be paid
after a long line of creditors. If the judge accepts their motion, it will be
the first time Stelco's closed-door board discussions will go before the court.
The company's restructuring plan --
being voted on by bondholders today -- calls for existing Stelco shares to be
wiped out.
Woollcombe -- along with Roland Keiper
-- left the board in September, alleging the company's restructuring plan is
based on unrealistically low steel prices and unfairly strips the value of 102
million shares. They have threatened legal action against the company.
Woollcombe and Keiper control close to
20 per cent of Stelco shares through their companies Equilibrium Capital
Management Inc. and Clearwater Capital Management.
Shareholder lawyers Peter Jervis and
George Glezos of Lerners LLP want Woollcombe to answer questions about why he
resigned and how Stelco's financial forecasts in June, July and August were
determined and used in the company's current restructuring plan.
In their notice of motion, Jervis and
Glezos state Woollcombe's evidence is necessary to address "the issue of
the fairness and reasonableness of the plan of restructuring."
Doug Pollitt, a Toronto broker who is
part of the loose collection of shareholders behind the motion, says the Companies
Creditors Arrangement Act "should not be an excuse to run roughshod over
shareholder rights."
While a special adviser appointed to
examine the Keiper and Woollcombe complaints found nothing wrong with Stelco's
forecasts, it did disclose that Keiper questioned 13 steel analysts and found
their consensus pricing for hot rolled steel in 2006 was $490 US a ton.
The Stelco forecast predicted $458 US a
ton.
So, between February and August, Stelco
managers cut their earnings outlook for 2005-06 from $591 million to $327
million. That wiped out any chance shareholders would get a piece of the pie.
"Something happened in August that
the court should know about," Pollitt said. "The company owes it to
shareholders to prove why shares should be wiped out forever."
At Stelco's highest share price this
year of $4.48, the company's shares were worth more than $457 million.
Yesterday, the price closed at 24 cents, making the shares worth less than $25
million.
Yesterday, the Ontario Court of Appeals
dismissed a bid by convertible noteholders to be named a distinct creditor
class.
The distinction would have given
noteholders the power to vote down the steelmaker's restructuring plan today.
Stelco has lumped all its creditors together in one voting class and
concentrated on wooing the most powerful group, the bondholders.
The plan must get the support of
two-thirds of Stelco creditors.
mmacleod@thespec.com
905-526-3408