The Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator for permission to post the following article by Reporter Steve Arnold published in the February 15, 2006 edition

Stelco gets OK to split into nine units

By Steve Arnold
The Hamilton Spectator
(Feb 15, 2006)

One of the last major hurdles to Stelco's long bankruptcy saga has been cleared.

In a decision released late yesterday, Justice James Farley approved the company's restructuring into nine business units -- a plan its new owners say gives it the best chance of survival once it leaves the sheltering arms of the Companies Creditors Arrangements Act.

In his decision, Farley accepted those arguments, writing the "proposed ... arrangement represents the only prospect for Stelco to emerge successfully from the CCAA proceeding, together with the maximum financing flexibility necessary to optimize its chances of long-term viability."

The decision clears the way for the company to leave bankruptcy protection sometime between Feb. 28 and March 31. The first date was set by Farley, the second the date the company sought.

Under the restructuring proposal made Jan. 20, Stelco Inc. would become a holding company owning the assets of nine general partnerships consisting of its Hamilton steel operations, Lake Erie steel, Hamilton coke, Lake Erie coke, Hamilton energy, Lake Erie energy, mining, Hamilton land and Lake Erie land.

Each unit will have its own management, employee communications, web page, signage, human resource functions and accounting records.

Stelco's new owners, including Tricap Management Ltd., say it gives them the best chance of raising capital and will force each unit to be more accountable for its operating results.

Local 1005 of the United Steelworkers raised fears the new structure would make it easier to close or sell the obsolete and unprofitable Hilton Works complex in Hamilton.

Local 1005 president Rolf Gerstenberger worried Hilton Works, with its aging facilities and heavy pension liabilities, could have difficulty finding a buyer compared to the Lake Erie plant which is considered among the most efficient in North America.

Farley said Tricap's offer to freeze dividend payments on Stelco stock until it has fully re-funded the pension liability soothes those concerns.

" ... assurances have been given that this arrangement is not designed to allow a sale or other disposition of any business unit in the immediate future," he wrote. "... I am satisfied that the ... arrangement option is the only realistic and reasonable alternative ... available to accomplish that end."

Stelco filed for bankruptcy protection Jan. 29, 2004 citing a massive pension deficit and mounting losses which threatened to leave the company without operating cash.

sarnold@thespec.com

905-526-3496