The Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator for permission to post the following article by Reporter David Paddon, published in the November 22, 2005 edition

Stelco delays creditors vote again, works feverishly to negotiate new deal

By DAVID PADDON

TORONTO (CP) - Stelco Inc. worked feverishly Monday to negotiate a new restructuring proposal that will win the support of its creditors without alienating its unionized workers, the Ontario government and Tricap Management Ltd.

The struggling Hamilton-based steelmaker had hoped to have its creditors vote Monday on a restructuring proposal, but adjourned the creditors meeting until late Wednesday after a weekend of intense talks failed to resolve an impasse.

Stelco chief executive Courtney Pratt apologized to creditors and proxyholders who had gathered at a convention hall in Mississauga, Ont., but said it would be fruitless to vote on a proposal that was certain to be rejected.

Outside the meeting room, Pratt told reporters that around-the-clock negotiations continued and he was hopeful that the four main stakeholder groups - creditors, unions, Tricap and the province - would be able to reach a deal they can live with.

He added that Stelco has also had talks with the City of Hamilton and federal officials, among others, in an effort to find a workable solution.

I can't tell you what the plan is going to be, Pratt told reporters.

This is a very tough process - trying to get four parties to agree on something. You talk to one group about something and that impacts arrangements with all the other groups, Pratt added.

He said agreement has proven elusive so far, but we're going to give it one last shot because it's important that we have tried everything to achieve that.

Pratt said he couldn't discuss any of the matters still on the table but said he hopes that a new plan can be presented on Stelco's website late Monday or early Tuesday, to give creditors time to read it before the vote is held Wednesday.

The number of issues dividing the parties has been reduced since Thursday, when Stelco creditors were originally going to vote, with both monetary and non-monetary items still on the table.

Any plan requires approval from creditors holding two-thirds of Stelco's debt, as well as approval from the Ontario Superior Court of Justice.

The original restructuring plan, which is now effectively dead, would have paid creditors about 66 cents for every the dollar owed to them by the company.

Stelco's bondholders are owed about $328 million including interest - enough to give them a veto.

The other major debtholders are Stelco's convertible debenture holders, who are owed about $110 million, and trade creditors, who are owed $228 million.

The creditors' representatives, who didn't address the 15-minute meeting, have long said they wouldn't support the company's restructuring plan which was cobbled together after months of negotiations and court appearances.

Stelco's plan was based on two financing agreements which together will inject about $550 million into the company. One is a $100-million loan from the Ontario government, the other is a $450-million financing deal with Tricap Management Ltd.

In return for its loan, the province is requiring Stelco to make a $400-million downpayment into its $1.3-billion pension solvency deficit.

Time is running out for Stelco, which got court-protection from its creditors about 22 months ago - in January 2004.

If an acceptable deal isn't worked out this week, Stelco is due back in court Friday, when Justice James Farley will begin hearing alternative proposals from other parties.

Pratt told reporters Monday that he doesn't know what alternative plans may be brought forward, but agreed an outright sale of the company would be more likely if there's no consensus among the major stakeholders.

In addition, he agreed the downsizing announced Monday by General Motors of Canada would likely have an impact on the steelmaker.

Will it have an impact on these discussions? I don't know, Pratt said. But when one of your biggest customers is having difficulty, it's something you've got to keep at the back of your mind.

Stelco shares (TSX:STE.A) closed at 19.5 cents, up 2.5 cents, with over 1.9 million traded Monday. Under most restructuring scenarios, the stock will become essentially worthless as part of the restructuring.