SSPO MEMBERSHIP
MEETING
FEBRUARY 19, 2004
HAMILTON CONVENTION CENTRE
This was the first meeting of the membership and was attended by Murray Gold and Andrew Hatney, our legal counsel with Koskie Minsky, who made brief presentations and answered questions from the floor for over an hour. About 1000 salaried retirees attended the meeting along with media representatives. The MC for the evening was Paul Wendling who introduced the members of the SSPO Committee and urged those salaried pensioners who were not yet members to join. The Committee, by court order, now represents all 3500 salaried pensioners affected by Stelco filing for CCAA protection. Paul also urged members who have not yet paid the $50 to send in their cheques. Even though Stelco has agreed to cover our costs from January 29, 2004 we have significant costs up to that date and, as future costs can not be predicted, a contingency fund is considered essential. Any funds in excess of our needs will, of course, be returned to the members.
In this summary of the meeting the major points made by our lawyers in their introduction will be summarized followed by the questions and answers.
Gold described the Stelco filing for CCAA protection as “a very, very big issue. This is so enormous that it necessarily becomes political.” “The provincial and federal governments need to be involved, especially with protecting your pensions and benefits, because if they’re not the level of vulnerability skyrockets.” “The people who can make them pay attention and make them get involved and do what’s right are in this room.” The most important sphere in the restructuring process for us will be the sphere in which “you hold your elected authorities accountable.”
Stelco has filed for CCAA because, in its view, the alternative is a bankruptcy liquidation. For companies facing insolvency, restructuring is by far the better option.
At this stage, all the stakeholders (banks, bond holders, suppliers, union, salaried pensioners, etc) are trying to put together a new business plan that is viable and will allow Stelco to survive. “Necessarily, that involves compromise and it is anticipated that every sector will, in some way and to the limit of its ability, compromise.” “It is in the nature of this process that each constituency gives something up.” The goal is to fairly spread the pain. If that’s not the case the process is in jeopardy.
We are in the very early steps of CCAA. The next normal steps are:
· the stakeholders, such as the retirees, become organized, and,
· the Company begins to legislate and develop a plan that shows what the new Stelco will look like.
Developing the plan involves:
· disclosure, in which the company provides confidential information on the current business and future plans under a confidentiality agreement, and,
· negotiations with the constituencies on what can be done, coordinated by the Company's Chief Restructuring Officer (Hap Stephen).
It was clear from Stelco’s filing materials that they consider retiree costs as a major expense and we must anticipate that Stelco will come to us with proposals to reduce them.
The Ontario Pension Benefit Guarantee Fund (PBGF) is intended to contribute to pensions when the plan is wound up with a deficit. But this fund is currently short of money and could not, at present, cover the deficiencies in the Stelco plans. “If only for this very excellent reason this crisis is a political one.” The PBGF can also help in situations other than plan wind up.
The restructuring plan (the Plan of Arrangement) must be voted on by the creditors. Because each retiree may be a creditor we are important and this gives us bargaining leverage. If the plan is approved through the vote and by the court, Stelco emerges from CCAA and resumes business in the ordinary course.
So far we have a court order that every salaried retiree is represented by SSPO (unless an individual opts out). SSPO will take advice from Koskie Minsky and perhaps other specialists and, with input from the membership, give instruction to Koskie Minsky. The Representation Order of February 13 means that Stelco has agreed to cover SSPO’s costs to large degree. This is a “fair way of dealing with this problem.”
The next legal step for us is to challenge a paragraph in the Stelco initial order which gives them the unilateral right to tear up or reduce employee contracts, such as the Benefit Plan. We are going to court on March 5 to seek to change the Order so that no changes can be made without the consent of the court.
Hatnay briefly described the difference between CCAA and the Bankruptcy and Insolvency Act, which is designed to liquidate a company. Within CCAA there is a ‘stay of proceedings’ which prevents creditors from taking action against the company. This is of limited duration and must be extended frequently. Stelco was recently granted by the court an extension of its stay until May 28. If Stelco’s restructuring effort fails then the next step is insolvency, at which point the secured creditors, such as banks for example, have first priority of the assets. The unsecured creditors, including the pensioners and employees among many, get what’s left (not including the pension funds which are separate and secure, to the degree that they are funded).
These will be presented in the order that they were asked.
Q What should we be doing to influence the politicians?
A Hold more meetings like this one and invite your MPPs, MPs and municipal politicians to them so that they can be held accountable. Emphasize the importance of PBGF. Talk the issue up with everyone.
Q As an active employee who is a member of SSPO, will my interests be represented?
A Legally, SSPO only represents salaried retirees, not active employees, however, there is a considerable overlap of interests, especially for those close to retirement. Salaried active employees may want their own group to represent their special interests not covered by SSPO.
Q I have been told by Stelco that the Hilton Works pension fund is underfunded by 19% and that, if it is wound up my pension benefit will be reduced by that amount. Is this correct?
A That is correct and the purpose of the PBGF is to make up some of the shortfall. However, there is a political problem that the PBGF is also underfunded.
Q We have been told that there are 17 different pension plans. Are some more secure than others?
A Yes, although until we get up-to-date actuarial data we can’t give more details.
Q I’ve
heard that the hourly plans are more underfunded than the salary plans. Could they all be merged?
A It is unlikely that they will all be merged. Generally, hourly and salaried plans are not merged but there is more potential for the different salaried plans to be merged.
Q How might the bridging benefit be affected?
A When the bridging benefit is from the pension plan (which we believe it to be) if the plan is wound up and is underfunded the bridge will be reduced proportional to the level of underfunding. PBGF does not apply to this type of benefit.
A The court order specifies that Koskie Minsky take their instructions from SSPO. The only slight risk is from the account details that Stelco have the right to request before they pay but there will be no disclosure of instructions, advice, tactics or strategy and the lawyers are under overwhelming professional obligation to maintain confidentiality.
Q Will the life insurance be intact through CCAA?
A Life insurance is part of the benefit package which is currently intact. However, it may be eliminated or reduced during the negotiation process during CCAA.
Q What can we do to attack the executives’ ‘gold plated pensions’?
A The SSPO scope excludes so called ‘top hat’ pensions and only covers the basic pension. In other CCAA cases the unions and salaried employees have not been very successful in attacking these pensions.
Q Are the widows or widowers of salaried retirees represented by SSPO?
A Yes.
Q How vulnerable are we to the large corporate creditors and investors?
A Make no mistake, we are not at the top of the power apex. A new investor may not feel a large obligation to retirees. But, the negotiations are court supervised and should be fair. Our strengths are political, voting power and moral.
Q What is the benefit provided by PBGF?
A PBGF kicks in when an underfunded pension plan is wound up. It guarantees a full pension up to the first $1000 per month. Above that the pension is reduced by the percentage underfunding.
Q What can happen to pension and benefits during CCAA?
A Benefits can be reduced and pension plans can be wound up during the CCAA process. How and when this occurs is all part of the negotiations.
Q How long are the CCAA proceedings expected to last?
A We expect to be in the thick of things in 6 months and the whole process will probably take at least 1 year.
Q If Stelco becomes financially successful after restructuring can the pensioners recover any of the benefits given up in CCAA?
A That would be part of the negotiations.
Q Why is the pension plan underfunded?
A In the 1990s a change was made to the regulations that allowed very big companies to not fund on a solvency basis (that funding required to ensure the plan is fully funded on wind up). It was assumed that such large companies would not go bankrupt. Because Stelco took advantage of that regulation, and low interest rates, Stelco’s plans would not be fully funded on wind up, if indeed, they are wound up. This was a bad regulation and has since been changed.
Q Was the exclusion of Altasteel and Norambar from CCAA permissible?
A Yes.
Q What happened to the pensioners when Algoma went through CCAA?
A The salaried plans were split between active employees and retirees (not wound up) with the active employees receiving a bigger proportion of the assets. However, the retirees received support from PBGF while the active employees did not.
Q Does completion of the CCAA process bring closure to our pension and benefit concerns?
A Yes. On the other hand it’s possible for Stelco to go back into CCAA in the future, as Algoma did.
Q How does the SSPO handle the finances? Does it know what the costs will be?
A We know that Stelco will most likely pick up expenses after January 29. Our expenses before then were about $15 000. However, there is uncertainty about future costs so the committee wants to build and maintain a contingency fund.
Q What is the significance of the word “crystallize” with respect to benefits?
A We will take the position that benefits are vested on retirement and so crystallize (become fixed) but the laws surrounding benefits are much more complex than those concerning pensions.
Q Hilton Works is badly contaminated. If Stelco was liquidated who would have first option on the assets, secured creditors or environmental clean up?
A The Ministry would do an environmental assessment and would not allow plant sale before the problems are fixed. The cost of that would be taken from the assets.
Q Why is there so little action from the politicians?
A The process is just starting.
Q Do you have any comments on the Union position that Stelco is not insolvent and should be taken out of CCAA?
A We don’t have hard data to know if the Union has a case. If the court lifts the stay and Stelco exits CCAA after declaring itself insolvent it would be very difficult for them to carry on business.
Q Can we stop Stelco’s executives from getting the same kind of financial package that Air Canada executives received?
A This is one of the most ugly aspects of restructuring, but a new equity investor, one of the most powerful interests, who can lay down his conditions, may be willing to pay to keep key people.