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 22, 2005 edition
By Naomi
Powell
The Hamilton Spectator
(Dec 22, 2005)
Local Stelco shareholders packed a
meeting room in the Sheraton Hotel last night to hear of a legal action to
overturn the steelmaker's restructuring plan.
Outraged by Stelco's plans to wipe out
existing stock, a shareholder group -- which includes Toronto investment firm
Pollitt & Co. and AGF Management Ltd. -- is anxious to rally support for
its action, which will be heard in court Jan. 17.
They will ask Justice James Farley to
order a sale of the company -- which Pollitt says is the only way to prove what
Stelco is really worth.
"The conduct of this company
toward its shareholders has been nothing short of shocking," Doug Pollitt,
a Toronto investor involved in the action told a crowd of about 100 people.
"What rightfully belongs to
shareholders is being thrown like a bone to other parties in the process."
Stelco's restructuring plan, approved
by creditors in a vote Dec.9, would see current shares replaced with new stock.
A large portion of that stock would go
to Tricap Management and hedge funds Appaloosa Management and Sunrise Partners.
Pollitt said Stelco should never have
been granted the bankruptcy protection it received under the Companies
Creditors' Arrangement Act (CCAA) in January 2004 because it was never close to
insolvency. This was proven, he says, when the company started making record
profits in 2004, thanks to soaring steel prices and ravenous demand for steel
from China.
Pollitt urged the shareholders at the
meeting to send letters to Premier Dalton McGuinty and Minister of Finance
Dwight Duncan asking them to only support a restructuring plan that does not
eradicate shareholder equity.
"The elephant in the room of these
proceedings has always been that the company was not actually insolvent,"
Pollitt said.
The shareholder group believes Stelco
downgraded a crucial steel market analysis in August in order to justify
cancelling shares. They have also accused the company of lowballing its
financial forecasts to diminish Stelco's value.
The group commissioned business
valuators Navigant Consulting to provide a separate report on the forecasts.
The report, released publicly last week, estimates the 2006 price of hot-rolled
steel at $525 per tonne.
Stelco has forecast $458 a tonne. That
suggests that there is $1.1 billion to $1.3 billion of equity in Stelco or
$10.76 to $12.71 a share.
"This company has a lot of
value," said Peter Jervis, a lawyer for the group. "It's a far better
and more valuable company than its own executive is saying."
Given the recent $4.8 billion takeover
bid of Dofasco by Germany's ThyssenKrupp, a court-ordered sale of Stelco would
likely attract some handsome bids, Jervis said.
After the meeting, he added that
individuals dissatisfied with the plan have started approaching some major
industry players to gauge their interest in a potential sale.
The presentation drew frustration and
anger from the shareholders in the audience, many of whom have owned their
shares for several years.
"Who are they to steal from us to
give to others?" shareholder Arnold Bortolotto asked the crowd. "Who
has given them the right to steal from us?"
Rolf Gerstenberger, president of
Stelco's largest union local representing Hamilton Hilton Works employees, took
the microphone to express support for shareholders.
Gerstenberger's Local 1005 of the
United Steelworkers has refused to take part in Stelco's restructuring, calling
it a form of "legalized theft" designed to break labour contracts.
"We don't agree that CCAA should
be used to attack the legal rights of shareholders," he said.
npowell@thespec.com
905-526-4620