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
December 5, 2005 edition
By Naomi
Powell
The Hamilton Spectator
(Dec 5, 2005)
Embattled Stelco is expected to release
an amended version of its restructuring plan in time for a court hearing this
morning.
But company officials refused to say
last night if all sides back it or the steelmaker is going it alone.
Stelco negotiated through the weekend
in an attempt to mould a plan that will win the consent of all stakeholders,
said Helen Reeves, spokesperson for the company, which planned to file the plan
with the court this morning. Stelco would have no further comment before it
goes before Justice James Farley this morning.
The deal was on shaky ground going into
the weekend when the steelmaker's court appointed monitor expressed doubt on
whether it will survive a creditor vote scheduled for Friday.
Lenders dealt Stelco a second blow last
Friday when they announced plans to ask the court to appoint an interim
receiver if Farley refuses Stelco's request for a 12th extension on its
bankruptcy protection.
Stelco will ask the court today for an
extension until Dec. 12.
Two weeks ago, Farley told squabbling
stakeholders that if Stelco failed to come up with a plan that had their
support he would fly home from his vacation to hear alternate plans for the
company. Those could include a court-ordered sale or liquidation.
The steelmaker went into intense
negotiations until Nov. 23, when an optimistic Pratt announced that Stelco's
creditors, the company, the unions and the province had all agreed on the
monetary elements of a plan.
Since then, however, stakeholders have
had serious disagreements about the non-monetary elements, Pratt said. New
complications arose last week when the convertible noteholders - a class of
Stelco creditors who stand to lose everything in the deal - offered to purchase
up to $172 million of a new group of unsecured notes that are convertible to
shares to be issued when the steelmaker emerges from bankruptcy protection.
Proceeds from the sale, combined with other compensation, would be enough to
repay Stelco's senior bondholders in full, the noteholders say.
Pratt said Friday that the offer added
a "new dimension" to the negotiations. He said the proposal makes
attempts to reach a consensus on restructuring more difficult.
At the same time as the company
struggles with its bondholders, the court-appointed monitor raised concerns
about how quickly Stelco is going though its credit.
Stelco has drawn $67 million from its
line of credit since September and anticipates spending an additional $74.8
million by Feb. 28.
Analysts said it is unusual for a
company in the midst of bankruptcy protection to lean so heavily on loans.
"There aren't many situations I
can remember that a company's increased its loan by that much while in
bankruptcy protection," Bruce Leonard, president of the Insolvency
Institute of Canada, said last week.
"This is highly unusual. There's
money leaking out somewhere."
Pratt said the company needed the cash
for an ongoing upgrade of its Lake Erie hot strip mill, part of a capital
expenditure program.
Also eating into Stelco's pockets is an
$11.3-million break fee to Tricap Management, the restructuring firm
underwriting the company's exit from bankruptcy protection. The fee was
revealed in a report from Stelco's court appointed monitor yesterday.
Stelco entered an agreement with Tricap
several months ago when the firm committed to providing Stelco with $450
million in financing. The break fee was in place in case Stelco backed out or
"if the terms of the agreement originally proposed were not
consummated," Pratt said.
"The deal has changed enormously
since we originally put that in place," he said. Stelco has postponed
several creditor votes since it reached the deal.
npowell@thespec.com
905-526-4620