The
Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator
for permission to post the following article by Reporter Joan Walters published
in the February 4, 2004 edition
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Feb. 4, 2004. 01:01 AM |
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Creditors wait for next step |
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33 companies have a stake in restructuring and must
negotiate individually for debt payment |
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By Joan Walters |
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Marlene McIntyre remembers feeling a bit ticked at Stelco Inc. when it went to a major international company instead of considering her smaller, local firm for information technology help. The head of McIntyre Management Resources, a Hamilton recruitment firm, was passed over in 2002 when Stelco did a 10-year deal with EDS Canada Inc. for IT services. Although small, McIntyre had supplied contract employees and advised Stelco on IT matters in the past. "I was a little disappointed I wasn't even given a chance to bid on it," McIntyre says of a deal that saw Stelco outsource all its IT needs to EDS, a $21-billion-a-year global service firm. Now, a thankful McIntyre is "breathing a huge sigh of relief" that she hasn't been caught in the morass surrounding Stelco's insolvency, where creditors will wait months to see how many cents on the dollar, if any, they can retrieve. "In hindsight, it's obviously the best thing that could have happened," a relieved McIntyre says. "I sure wouldn't want to be lining up for pennies." Now under court-ordered protection against creditors, Stelco has billions in liabilities, including $545 million in long-term debt and $300-million-plus in accounts payable to corporations like EDS. Even EDS officials say they are "still trying to figure it all out." "We're clearly in the process of trying to understand what the implications are," said spokesperson James Toccacelli . "We don't know that answer yet." The contract that Stelco signed with EDS in February, 2002, was complicated, Toccacelli says, and no financial information about it was released. But the deal was publicized by both EDS and Stelco as proof that the steelmaker was entering what was called the "leading-edge areas" of IT. What that really meant was Stelco was joining the host of other major companies in transferring employees off its payroll in an exercise known as IT outsourcing. Banks, transportation companies, manufacturers, retailers, just about every sector, is involved in shedding responsibility for its own IT. In Hamilton, the outsourcing deal meant that 200 computer and systems staffers from Stelco would become EDS employees, taking their pay and benefits to the new employer. In exchange for taking on the Stelco IT workers, EDS would get all the steelmaker's capital spending for IT, things like systems for order flow, human resources and finance. Stelco said at the time it would experience major cost savings over the life of the deal. EDS is one of the world's largest firms, with 7,200 workers in Canada and 140,000 worldwide. It was founded by billionaire Ross Perot in the 1960s and today has revenues of $21 billion US. Toccacelli said the Stelco insolvency is "not material" to EDS, a phrase that means the financial hit to EDS is not considered major. But since no dollar figures have been disclosed, it will not be known publicly until later in the court case how much the contract is worth. McIntyre says there is no question in her mind that the arrangement was for "multi millions of dollars." And now that new employer, EDS, will join 32 other secured creditors to battle for their debts. But, each company will have to negotiate one by one. Bruce Leonard, Chairman of the International Insolvency Institute, said that's one of the many things about the Companies' Creditors Arrangement Act (CCAA) that needs to be changed. Under bankruptcy protection proceedings in the U.S., called Chapter 11, the creditors form a committee and negotiate with the company as one large group. In Canada, each company is on its own. Leonard said large companies are always able to get good lawyers and be well informed. Many of Stelco's 33 indebted companies would not comment on their debts. A spokesperson for Massey Metallurgical Coal Inc. said that the company's coal delivery deal with Stelco will remain in place. The company said it did not believe it had any outstanding debt, but did have some coal sitting on Stelco property. John Amodeo, vice-president and CFO of Samuel Manu-Tech Inc., said Stelco is one of the company's major customers and suppliers, and the two companies continue to have a positive business relationship. The metal-fabrication company is waiting to receive direction from the court-appointed monitor. John Deere Credit Inc. simply said it will be working with the courts. Enprotech Corp. said its debt is very minor, and resulted from some consignment business. Strongco Inc.'s president Larry Pirnak said it is also owed a minor amount, and that the company would not comment any further. Other secured creditors include: CIT Business Credit Canada Inc. (as an agent), Gibraltar Steel Corp., General Electric Canada Equipment Finance, Champion Road Machinery Sales, ABN Amro Leasing, National Leasing Group Inc., Metallurgica North America, Caterpillar Financial Services Ltd, Bank of America, J&M Tire International Inc., Pitney Bowes Leasing, Citicorp Vendor Finance Ltd, Duferco S.A., Mono Ceramics Inc, Compaq Financial Services Canada Corp, Red-D-Arc Ltd., BML Leasing Ltd., Comdisco Canada Inc., IBM Canada Ltd., Storagetek Financial Services Canada Ltd., Xerox Canada Ltd., Leastec Canada Ltd., Hewlett-Packard Canada Ltd., Bank of Tokyo-Mitsubishi, The Maritime Life Assurance Co., and Canadian Equipment Finance. jwalters@thespec.com 905-526-3302 With files from Tara Perkins |