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Stelco has received the final offers that will decide the Hamilton
company's future.
Suitors for the ailing steel giant had until midnight last night to
submit their bids, which must begin around the $1 billion mark. Stelco
will start studying them today.
When this year began, seven companies were interested in buying or
refinancing the steelmaker. The playing field has narrowed but Stelco has
not disclosed the final list of bidders. Deutsche Bank, Severstal, U.S.
Steel, Algoma, Sherritt International, TD Securities and Mittal Steel
were eligible to submit bids, but Algoma dropped out last week.
Sources say Deutsche Bank and Sherritt are still in the game.
And yesterday, Severstal confirmed the Russian steel giant was
submitting a bid.
Late Sunday night, United Steelworker locals from Nanticoke, Alberta
and Quebec announced they are throwing their support behind Severstal.
Rolf Gerstenberger, president of Hamilton Local 1005 -- the largest
local, representing more than 3,000 workers -- said he's not endorsing
any bidder.
"I'm not ready to play Russian roulette yet," he said,
noting he hasn't been involved in discussions with the bidders and does
not know the details of Severstal's offer.
Bill Ferguson, president of the Lake Erie local, said Severstal has
embraced the union's principles, which include no concessions, keeping
all of Stelco's subsidiaries, and addressing Stelco's pension deficit.
"I'm happy at where Severstal is right now," he said.
"We'll go back at it next week and look at achieving some paper
between the parties."
Ken Neumann, national director of the Steelworkers, said Severstal has
"treated the United Steelworkers, the retirees and the community
with respect," but added that "it's not over yet."
He said the Steelworkers are still willing to listen to the other
bidders, with whom they've been meeting over the past several weeks.
The union holds power in the process because AltaSteel and Lake Erie
are without collective agreements and could strike if they don't sign a
new contract with the winning bidder.
Severstal spokesperson Ian Blair acknowledged there are still issues
that need to be addressed with the union.
"We are encouraged by the actions of the union, but there is
still work to do," he said.
He added the Russian steelmaker also needs to come to agreements with
other Stelco stakeholders, who include salaried workers and the
provincial government.
Support from stakeholders could play a large part in the decision of
Stelco's board, which is responsible for choosing a winning bid.
"If Stelco chooses someone that doesn't take to heart our
principles, sure there's going to be a struggle," said Neumann.
And the group representing Stelco's 1,600 salaried workers also plans
to endorse one of the bidders.
"We're still deep in discussions with each of the bidders,"
said spokesperson Rob Moffat. "Things are changing. The government
coming forward represents a change in the picture."
Last week, the provincial government informed Stelco it must start
paying off its $1.3 billion pension deficit after it emerges from
bankruptcy protection.
Since 1996, Stelco has been taking advantage of an old provincial law
that allows large companies not to pay their solvency deficiencies.
A solvency deficiency is a fund that covers all the pension payments
owed to workers in case the company goes bankrupt or has financial
troubles.
Although Stelco has always paid its retirees their pension cheques --
which costs the company about $60 million a year -- the steelmaker has
not been filling a contingency fund.
If it went under, it would be short $1.3 billion needed to pay current
workers and pensioners the money they are owed.
Moffat said the government's move was a good one, but noted that the
province shouldn't be let off the hook for allowing Stelco's deficit to
increase.
Without provincial help, the winning bidder for Stelco could face
pension payments up to hundreds of millions of dollars over the next
several years.
The government has committed to negotiations with the bidders to come
up with a solution, but is not offering any financial help.
Stelco will analyse the bids and may take them back to the bidders for
clarification, said Hap Stephen, the chief restructuring officer for
Stelco.
The bids will then be taken to the board of directors, which will
narrow the field to one or two. "We're going to move as fast as we
can," Stephen said.
Once the board makes a selection, it will hold discussions with
Stelco's stakeholders.
Eventually, one bid will be taken to the creditors for a vote.
A majority of the company's creditors must agree to the plan for it to
pass.
They must represent at least two-thirds of the money owed.
Stephen said shareholders could "potentially" have a vote.
The steelmaker's shareholders argue that they should have a say
because Stelco's shares could be trading at a much higher price if the
steelmaker had not entered bankruptcy protection shortly before the steel
market hit an all-time high.
The final stamp of approval on the winning bid will come from Justice
James Farley, who is overseeing the bankruptcy protection process.
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