The Stel Salaried
Pensioners Organization wishes to thank The Hamilton Spectator for permission
to post the following article by Reporter Naomi Powel, published in the January
19, 2006 edition
By Naomi Powell
The Hamilton Spectator
(Jan 19, 2006)
Stelco's future owners have unveiled a corporate
reorganization plan that has employees concerned about the future of Hamilton
Hilton Works.
Tricap Management plans to separate Stelco's Lake Erie and
Hamilton Hilton Works into individual subsidiaries that would be managed and
financed independently.
The restructuring fund says the move will make it easier for
the subsidiaries to raise money and will create more accountability for each
business.
But concerned employees caution that the arrangement will
allow Stelco's new owners to easily sell off its parts, particularly the
profitable Lake Erie mill.
"This plan cleaves off Hilton Works from Lake
Erie," Andrew Hatnay, a lawyer for Stelco's salaried pensioners, said
outside the Ontario Superior Court yesterday. "The clear piece throughout
this (restructuring) is that Lake Erie is a valuable asset and Hilton Works
needs major work. We have no comfort that this plan is not going to imperil
retirees."
Tricap attempted to assure employees in its court proposal,
describing the reorganization as "the greatest opportunity to realize the
turnaround potential of the Hamilton operations."
Hilton Works has higher costs than Lake Erie and has been
called one of the least competitive steel mills in North America by Stelco CEO
Courtney Pratt. Lake Erie, on the other hand, is one of the most competitive
steel operations on the continent.
Given the current wave of consolidation in the global steel
industry which has driven the bidding war for Dofasco, analysts say Lake Erie
could easily attract a buyer.
"Lake Erie is quite a salable asset on its own,"
said Joe D'Cruz, a University of Toronto business professor. "With Hilton
Works attached, it is harder to sell."
But Cyrus Madon, Tricap's senior vice-president, said a sale
was "not at all what we're contemplating here."
"The Hamilton operation is an integral part of
Stelco," he said. "We have proposed to make a very significant equity
investment in the entire organization and the success of our investment is very
much dependent on the success of Hamilton."
Tricap is contributing more than $50 million in cash to
Stelco along with a proposed $375-million loan. If Stelco's current
restructuring plan is approved by the court, Tricap -- owned by Brookfield Asset
Management -- will receive one third of the company.
The Tricap reorganization would see a variety of assets
become subsidiaries held in limited partnerships. Separate subsidiaries would
include Hilton Works, the Lake Erie operations, Stelco's energy assets, its
vacant land, its coke batteries and its mining interests. Stelco Inc. would
essentially become a holding company with a corporate head office.
In a letter to employees, Pratt said Stelco will remain
responsible for all pension plans and employment-related obligations.
"There's a strong commitment to turn around Hamilton
and make it competitive again," he said.
Justice James Farley has yet to approve Stelco's
restructuring plan, but could release his decision at any time. The judge
lashed out at lawyers on Tuesday when he learned that Tricap's $375 million
loan had yet to be finalized.
Stelco and Tricap pledged yesterday to have the deal in
place by 5 p.m. tomorrow. They also promised to nail down a key $600-million
loan which has yet to be finalized with lenders.
Farley has also reserved his decision on a request from a
Stelco shareholder group that wants a court-appointed monitor to have the power
to approach major steel companies about buying Stelco.
The company and its court-appointed monitor have insisted
that no potential buyers have approached Stelco in months.
npowell@thespec.com
905-526-4620