The Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator for permission to post the following article by Reporter Tara Perkins published in the December 24, 2004 edition
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Dec. 24, 2004. 12:43 AM |
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Legal Wranglings |
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United Steelworkers union wants Stelco to ante up
payment for lawyers |
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By Tara Perkins |
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Stelco and its union are playing cat and mouse over who will pay legal bills the union has racked up since Stelco filed for bankruptcy protection in January. "We've asked (the union) to tell us what they're going to do," said Hap Stephen, Stelco's chief restructuring officer. "We're not going to pay them to subvert the process." The United Steelworkers accuse Stelco of blackmailing them by refusing to pay their legal costs unless they do what the company wants. Stelco has spent millions of dollars on legal fees this year, and is covering the costs of lawyers for many stakeholder groups including the salaried workers, pensioners and bondholders. But the lawyer for the international arm of the United Steelworkers of America, Ken Rosenberg, has not been paid all year. He is representing the Steelworkers' Pittsburgh headquarters, from which president Leo Gerard and his team are shopping around for a company that will buy Stelco and work with the union. This fall, Stelco negotiated a $900-million financing deal with one of its bondholders, Deutsche Bank, and announced that it was looking for bidders who could top that deal. The deal requires no concessions from Stelco's workers, but it would see the steelmaker's subsidiaries sold off and does not address Stelco's pension deficit. The Steelworkers disapprove of the deal, and are trying to take the matter into their own hands by finding a buyer who will meet those two demands and work co-operatively with the union. Stephen said Stelco will not pay the union's lawyers to circumvent the steelmaker's fundraising process. "We're saying, 'OK guys, you want us to pay your fees, we want to know what we are paying you to do,'" he said. "We're not paying you to run the process for us ... We're not paying you to cause problems." Rosenberg declined to say how much his fees are, but one source pegged them in the low six-digits. The United Steelworkers' three area locals are represented separately by lawyer David Jacobs. Stephen said Stelco has paid Jacobs' fees, except those that relate to the union's attempts to have Stelco kicked out of bankruptcy protection. Stelco is also paying the union's financial advisers. Last month, the union asked Stelco to promise to pay all of its lawyers and advisers in exchange for a promise not to strike. Stelco required that promise in order to keep General Motors, its largest customer. At one point during the harried negotiations, Stephen agreed to pay both union lawyers all "reasonable" legal fees for "participation in Stelco's CCAA proceedings, subject to a reasonable monthly cap." Any moves that were "adverse" to Stelco's restructuring would not be paid for. But the negotiations crashed because of other union conditions, including veto power over who buys or finances Stelco and a massive reduction in the fees being paid to Deutsche Bank. The two sides have continued to negotiate the fees since. Stephen said he's waiting to hear what it is the United Steelworkers plan to do during the coming months. "If it makes sense, and it's within the process, then we'll sit down and deal with it," he said. Meanwhile, bidders have been popping up, each attempting to top Deutsche Bank's deal. Yesterday, the Dominion Bond Rating Service said that a recent $1.8-billion refinancing proposal from Sherritt International Corp. and the Ontario Teachers Pension Plan (who have partnered together under the name Island Energy Partnership) would be good for both Sherritt and Stelco. "Currently, Sherritt has a significant amount of its assets and revenue dependent on its operations there," DBRS said. "DBRS believes these facilities would be consistent with Sherritt's long-term strategy of becoming more integrated into the power business, which is considered prudent considering their long-life coal reserves," the agency said. The proposal would leave IEP holding a minority stake of Stelco's stock, and owning some of Stelco's assets. Sherritt would also benefit by adding to its list of Canadian holdings. Many of its current assets are in Cuba. Sherritt's main interest focused on co-generation plants that could be constructed on Stelco properties in Hamilton and Nanticoke, Ont., providing electricity that could be added to Ontario's grid. IEP will be jostling with many potential bidders in the battle for Stelco, including U.S. Steel, Severstal, Mittal Steel and Algoma. Stelco has disputed the $1.8-billion value that Sherritt and Teachers placed on their bid, saying it includes spending that would take place after it had taken control of Stelco's major steelmaking assets. As part of the plan, Sherritt and Teachers would become minority equity holders in Stelco. In exchange, lines of credit and an equity rights issue would be made available for Stelco to upgrade its Lake Erie hot strip mill, and to install a new pickle line in Hamilton. The assets that Sherritt and Teachers would acquire from Stelco include coke batteries, materials handling facilities and boilers. The ownership would be through a 50-50 joint venture named the Island Energy Partnership, which would enter into a contract to provide Stelco with coke used in the steelmaking process and energy from the co-generation plants at below current market prices. tperkins@thespec.com 905-526-4620 With files from Canadian Press |