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 24, 2005 edition
STELCO
$80m in taxpayers' cash brings bondholders on sideBy Naomi
Powell Stelco has clinched a last-minute
deal with its bondholders that should save thousands of jobs and protect
pensioners into the future. An additional $50 million from the
province and $30 million from the federal government were the key to solving
the impasse between steelmaker and bondholders. Last night's dramatic announcement of
a tentative agreement could see the steelmaker emerge from bankruptcy
protection as early as January. "You can certainly say with this
agreement there's an end in sight for this process," said Stelco CEO
Courtney Pratt. "We're very, very pleased." After 22 months of disputes among
stakeholders, the deal marks the first time all parties united behind a plan. It was reached after intensive
negotiations that delayed the company's creditor meeting for four hours. The
plan still needs approval from Stelco's board of directors and faces a
creditor vote on Dec. 2. But with bondholders' support, Pratt is "quite
confident" of its chances for success. The bondholders control $275
million of Stelco's total $640 million in debt, enough to kill any plan in a
vote. The $30-million federal contribution will be made through Environment
Canada's Partnership Fund to Stelco's co-generation project and is expected
to be paid during the first quarter of 2006. Cogeneration would take the waste gas
from Stelco's steelmaking facilities in Hamilton and Nanticoke and turn it
into electricity which will reduce the steelmaker's hefty energy bills. Stelco has told the government it
will spend $50 million on the project next year. The province will add $50
million to its $100-million loan into Stelco's $1.3-billion pension
shortfall. "Everybody's obviously pleased
that we have a deal," Pratt told reporters. "What's been achieved
tonight is very, very significant." Pratt said Justice James Farley was
"intimately involved" in the 11th-hour talks that led to the
amended restructuring plan. That plan will be released to its creditors
Monday. Given the progress made, the judge has cancelled plans to return from
his vacation in Florida tomorrow to meet with the steelmaker. Representatives of the bondholders
could not be reached for comment. "What a cliffhanger," said
Bill Ferguson, president of the United Steelworkers representing Lake Erie
workers. "We're very happy to have reached a consensual deal. It's going
to be a very bright future." The amended deal preserves the
$400-million payment on Stelco's $1.3-billion pension deficit. However, under
the new terms of the loan, Stelco will receive a six-month grace period from
pension-funding payments. In exchange for this allowance, the company will
increase its annual payments on the deficit to $65 million for the first five
years. It will make annual payments of $70 million for the following five
years. Liberal Government House Leader Tony
Valeri called the proposed deal "great news for Hamilton and for
Canada's steel industry. "I'm happy for Stelco, for the
employees, for the union, for the pensioners," Valeri said last night.
"Really, this was about all sides working together and coming together
to reach a deal." The Hamilton East-Stoney Creek MP
helped broker the federal government's contribution of $30 million. "There are a lot of families
that are dependent on that company, and a lot of suppliers in the community
that are dependent on the company," Valeri said. "They can now rest
a little easier knowing that the company will be able to come out of this and
be viable." News of the deal drew a tremendous
sigh of relief from Hamilton Mayor Larry Di Ianni. "We've been through a lot over
the last while," he said late last night. "This has been such a
roller-coaster ride that my emotions rose and sank a number of times. "But we seem to be on the road
to helping rebuild the company," he added. John Hanson, of the salaried retirees
organization, called the deal "excellent news. If you want to call it an
end to this, then it's terrific news for the economy and for Hamilton." During the nearly two years of
protection and wrangling, he said, pensioners have been left to worry about
their future. "This is going to be a huge
relief for pensioners," he said. "We owe a huge thanks to the
people involved in breaking this logjam. We can only hope that the proposal
is great for Hamilton and the company." Ray Silenzi, president of the
Hamilton chapter of the unionized retirees' organization, said his hope now
is for Stelco to quickly become profitable again so it can afford the
retirement benefits that are so important to his members. "This is a relief because it
seemed like it was going to go on forever," he said. "Now we can
get on with the business of building the company back up. "Whatever the deal is, I hope it
means the company can be profitable again so it can go on paying for our
benefits." Rob Moffat, spokesperson for Stelco's
salaried employees, had special praise for the federal and provincial
governments for providing the money that made it possible to meet bondholder
demands. "Courtney Pratt, both
governments and whoever else was involved in this needs to be congratulated
by all the parties," he added. "Now we can see a route out of this
quagmire and we just want to keep walking down that road." Richard McLaren, a University of
Western Ontario professor who specializes in corporate insolvency issues,
said Stelco's move to seek protection under the Companies' Creditors
Arrangement Act (CCAA) served its purpose. "CCAA is designed to preserve
jobs and to preserve enterprises," McLaren said. "It's achieved its
objective. "Now it's up to management to
make the plan work," he added. McLaren said he's also not surprised
by the way yesterday's events unfolded. "What you see is that the
bondholders played out the string to its ultimate end," McLaren said.
"I think we had predicted earlier this week that the only new money
coming in was going to be government money in some form or another." npowell@thespec.com 905-526-4620 With files from Steve Arnold and
Steve Buist, The Hamilton Spectator THE DEAL * $400 million upfront payment on Stelco's
$1.3-billion pension shortfall * No concessions in wages, pensions,
or benefits from workers * Federal government contributes $30
million to Stelco's cogeneration project, freeing up more money for the deal * Provincial government increases its
$100 million loan to $150 million * Stelco receives six months' grace
from pension payments. In exchange, the steelmaker increases its annual
pension payments for the first five years from $60 million to $65 million.
Annual pension payments remain at $70 million for the following five years. * Stelco exits bankruptcy protection
by the end of January |