The Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator for permission to post the following article by Naomi Powell, published in the October 30, 2007 edition
Judge to rule on fairness of Stelco purchase
The
Hamilton Spectator
(Oct 30,
2007)
U.S. Steel's $1.1-billion purchase of Stelco
will face its last significant hurdle in a Toronto courtroom today.
The deal, cleared by government regulators
yesterday, could close as early as tomorrow if it receives the court's stamp of
approval.
"It is absolutely the last big
obstacle," said Stelco chairman Courtney Pratt. "The court has to
decide if it's fair."
The sale was approved by shareholders last
week.
United Steelworkers Local 1005 president
Rolf Gerstenberger has already criticized the deal for releasing Stelco from a
pair of clauses he says protect pensioners. Those clauses require Stelco to
contribute excess cash to its pension plans and forbid dividend payments until
the plans are fully funded.
Local 1005 wants U.S. Steel to adhere to the
original pension agreement forged when Stelco emerged from bankruptcy
protection last year -- an agreement that includes the dividend restriction and
the so-called "cash sweep." If those clauses are removed however,
Local 1005 wants U.S. Steel to post "collateral security" in the form
of a letter of credit for an unspecified amount.
"The pension agreement was part of a
court order and the dividend restrictions were part of that order," said
Gerstenberger. "There has to be a high standard for changing that."
Gerstenberger and Local 1005 have outlined
their concerns in court documents filed ahead of today's fairness hearing -- a
requirement for any sale made through the arrangement provisions of the Canada
Business Corporations Act. He worries that although U.S. Steel is strong enough
to meet its obligations today, a downturn in the steel market could change
that.
Pratt says the removal of the dividend
restriction and cash sweep are outweighed by U.S. Steel's upfront pension
contribution of $32.5 million, and a corporate guarantee from U.S. Steel to
abide by the pension funding agreement. That agreement would see Stelco's
pension plans fully funded by 2016.
Stelco was unlikely to hit the target
triggering the cash contribution -- one that called for $75 million in free
cash flow after capital spending, debt retirement and other obligations, Pratt
added.
A commitment from U.S. Steel to fund the
pension plans offers more security to Stelco pensioners than existed before, he
said. "Would you want to bet on a stand-alone Stelco or U.S. Steel? It's a
much, much bigger organization with operations in different parts of the world
and it has a financial strength Stelco didn't have."
npowell@thespec.com
905-526-4620