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
January 24, 2006 edition
By Naomi Powell
The Hamilton Spectator
(Jan 24, 2006)
Stelco shareholders may appeal the court's approval of a
restructuring deal that erases the firm's existing stock.
Murray Pollitt, whose investment firm Pollitt & Co. was
part of a shareholder group that fought Stelco's restructuring plan, said his
company will likely bow out of any further court action. But another
shareholder group, which he wouldn't identify, is considering an appeal.
"We aren't the only group interested in this,"
Pollitt said. "There is certainly an outside chance there will be an
appeal."
Pollitt called Justice James Farley's approval of the plan
"disappointing and frustrating." The shareholders had asked Farley to
delay approving the plan for 30 days while it searched for a buyer for the
steelmaker.
Given the bidding war between European steel giants Arcelor
and ThyssenKrupp for Dofasco -- Stelco's neighbour on the Hamilton harbour --a
suitor for Stelco could also be waiting in the wings, Peter Jervis, a lawyer
for the shareholder group told the court last week.
But Farley denied that request in a decision released by
Stelco on Saturday, stating that "certainly Stelco is not Dofasco. Stelco
has been a wobbly company for a long time."
Farley's approval of the plan paves the road for Stelco to
emerge from court protection as early as March 1.
During its long journey through creditor protection, Stelco
has racked up more than $100 million in professional fees payable to lawyers
and advisors. Court documents released this weekend revealed that chief
restructuring officer Hap Stephen and his firm Stonecrest Capital Inc., are set
to receive a $2 million fee once the company emerges from protection. The $2
million fee is on top of the $2.1 million Stephen was paid between Sept. 2003
and Aug. 2005. Information about Stephen's compensation is contained in a
resignation letter written by Roland Keiper and Michael Woollcombe, two
controversial Stelco directors who resigned over disagreements with the firm's
financial forecasts.
Steel prices soared after Stelco entered protection under
the Companies Creditors' Arrangement Act, putting the firm in the awkward
situation of making record profits while legally insolvent. It also led
shareholders and unions to claim that Stelco was never truly at risk of going
bankrupt.
Farley said even the financial transfusion of the elevated
steel prices have not made Stelco a healthy company.
The approved plan calls for all existing shares to be wiped
out with new stock awarded to creditors and to financial sponsors Tricap
Management, Appaloosa Management and Sunrise Partners. Tricap is also providing
a $375 million loan to the company which is contingent on the court's approval
of a proposed reorganization plan. That plan, which would see Stelco divided
into six key subsidiaries, has sparked worker fears that Hamilton's ailing
Hilton Works may become vulnerable to a closure if separated from the
steelmaker's profitable Lake Erie operation. The subsidiaries would be managed
and financed independently.
Tricap insists it has no intention of closing the Hamilton
mill and that the revamping will increase accountability and maximize each
operation's ability to raise capital. Tricap is meeting with representatives of
Stelco's unionized and salaried employees this week to discuss the
reorganization.
npowell@thespec.com
905-526-4620