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
7, 2005 edition
By Naomi
Powell
The Hamilton Spectator
(Dec 7, 2005)
A judge ordered Stelco to push ahead
with a Friday vote on its restructuring plan, setting the stage for three days
of intense talks leading up to the ballot.
But if the plan dies at the vote, other
players are already waiting in the wings to take control of the process or even
push the steelmaker into receivership.
Stelco's bondholders, unions and
lenders all have ideas about how to end the company's 23-month crisis if the
plan goes down.
While the unions are expected to
propose a sale of Stelco's operations that would allow it to keep operating,
the bondholders are finalizing a restructuring deal of their own.
And Stelco's lenders, who are owed $217
million, are prepared to make a request to push the steelmaker into
receivership.
A no vote could put all of these
proposals into play on Monday, when Stelco's latest extension on its creditor
protection expires.
"I am directing and ordering that
there be no jiggery-pokery," Justice James Farley said yesterday.
"This is far too important for all
the stakeholders."
Stelco CEO Courtney Pratt said he
remains hopeful that negotiations over the next two days will result in a yes
vote, allowing the steelmaker to avoid facing a sale or worse.
"Our focus is on Friday and
getting a consensual deal that would make those issues moot," Pratt said
outside the Toronto court yesterday. "I'm hopeful. I think everyone
recognizes what's at stake."
Although Stelco has postponed numerous
votes over the past few weeks due to a lack of creditor support, Pratt said
there would be a vote Friday.
And the steelmaker's board of directors
will be on hand at all hours over the next few days to approve any changes to
the deal as Pratt and others haggle for the creditors' support. To pass, the
plan must win the support of two-thirds of its creditors.
In an interview, Pratt advised all
creditors voting by proxy to be ready to change their ballot at any time, as
the plan could change during the talks.
Although the unions support the plan
and want it approved, they have already prepared court papers requesting Stelco
be sold if the vote fails. The sale process would preserve "the assets of
Stelco so that it can continue to operate as a viable steel company, without
loss of jobs or pensions," the documents say. The Steelworkers have also
requested that Tricap be freed from any legal ties that might prevent it from
bidding on the company.
"It's our sincere desire that a
deal will be reached," said Bill Ferguson, president of the United
Steelworkers representing Lake Erie workers. "In case (the plan) goes down
however, we're prepared."
A key issue in the talks leading up to
the vote will be who gets Stelco's new stock.
Richard Orzy, a lawyer for the
bondholders, angrily rejected the deal proposed on Monday, which gave more cash
to creditors but limited the amount of shares they would receive.
Orzy vowed to kill the plan in a vote
and said the bondholders were working on their own plan. The bondholders
control $275 million (plus interest), giving them enough power to block any
deal. The deal would see 88 per cent of the company go to Tricap and two other
players.
In exchange for a joint cash
contribution of $137.5 million -- to be divided up among creditors -- Tricap
would take control of 35.2 per cent of Stelco's new shares while Toronto's
Sunrise Partners and New Jersey's Appaloosa Management would take 26.4 per cent
each.
The remaining stock would go to
Stelco's creditors and to the province of Ontario in exchange for its
$150-million loan. The plan, backed by the provincial loan and by a
$375-million loan still to be negotiated with Tricap, would maintain a
$400-million payment into its $1.3-billion pension deficit.
Orzy said the plan amounts to a
"forced takeover bid."
The bondholders, who outlined their
plan in a press release yesterday, would award 15-million shares to creditors.
They would then offer to buy those shares, setting aside $82.5 million of their
own money to do so. If all creditors took the offer, a diverse group of
bondholders could end up owning 60 per cent of the company.
Orzy said his plan will give creditors
"the right to choose" whether to keep or sell their shares.
As in the company deal, the bondholders
had also hoped to secure a $375-million loan from Tricap. In exchange, Tricap
would get the right to buy about 40 per cent of Stelco stock. The cash from
that sale -- about $55 million -- would be divided among creditors.
But Aubrey Kauffman, a lawyer for
Tricap, told the court yesterday that his client would not support the
bondholder plan.
"Tricap has no confidence it can
achieve a plan in this type of atmosphere," Kauffman said.
Orzy responded that his clients would
secure a lender of their own.
An end to Stelco's 23-month journey
through bankruptcy protection seemed close on Nov. 23, when Pratt announced
that all sides had agreed on the monetary elements of a plan. Discussions
deteriorated, however, forcing the company to postpone four creditor votes.
npowell@thespec.com
905-526-4620