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 March
3, 2005 edition
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Mar. 3, 2005. 12:29 AM |
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Stelco Stock Takes Off |
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Investors like company's decision to go it alone |
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By Tara Perkins |
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Stelco's shares soared nearly 30 per cent yesterday to more than $3 as traders reacted to the company's decision to reject its suitors and go on its own. That news is the latest unexpected twist in the steelmaker's 13 months of bankruptcy protection, the last few of which were spent on an auction that led to four bids for Stelco's main operations. Although Stelco now thinks it can do better than those offers, Chief Restructuring Officer Hap Stephen said the company is not conceding that it's solvent. "We've still got liabilities. What we've got to do is address them by recapitalizing, and that does not mean just going out and taking on debt," he said. Stelco says it still needs to raise about $400 million for upgrades to its operations, and money to pay off its pension deficit. The company believes it can do that with a new plan, which will be presented to the court later this month. Stelco will likely issue new shares and take on new debt. It is also proceeding with the sale of its subsidiaries. "We've been working away on it," Stephen said. "We think this is an opportunity, particularly with the union working with us and other stakeholder groups, to move this thing ahead. Let's take advantage of the high steel prices, and what it's meant for the company, and let's fix it on that basis." Stelco has refused to reveal details of the failed bids or why they were rejected. But at least two appear to have been withdrawn and one was too low to be considered, say sources. Deutsche Bank's $900 million refinancing offer was withdrawn after the provincial government said Stelco must pay its $1.3 billion pension debt. Sherritt International's bid expired Feb. 1 and was not renewed. And sources say Severstal's was too low to be considered. Shareholders welcomed Stelco's announcement, driving the stock up 70 cents over the day to $3.17. Share prices have been less than $2. Large shareholders have been arguing that there's significant value in Stelco, and that it could raise money without being sold. One of those shareholders -- Roland Keiper, who has millions invested in the company -- was added to Stelco's board of directors the day the steelmaker began examining bids. He was later removed by the judge overseeing Stelco's court protection. Justice James Farley said Stelco accepted Keiper to the board in a "poisoned atmosphere," because Keiper and his fellow shareholders may hold the power to have the entire board replaced by calling a shareholder's meeting. Today, the court of appeal will hear arguments from Keiper and fellow shareholder activist Michael Woollcombe -- who was also removed from the board -- asking for Farley's decision to be overturned. The United Steelworkers oppose the appeal. Yesterday, observers said it appears Stelco has accepted Keiper's argument that Stelco's finances are healthy and the company can right itself with help from the capital markets. Some analysts are unsure about that, saying Stelco must insulate itself against any drop in steel prices. Stephen said the decision had nothing to do with Keiper. After looking at the bids, "basically, we thought that there are better options for Stelco, and that is to refinance." Deutsche Bank's offer unravelled after the province said the steelmaker must pay its pension shortfall in the near future. That triggered a condition in the German bank's bid that allowed it to withdraw its offer. Although Stelco also received a refinancing offer from TD Securities, it has decided to reject that offer and arrange refinancing on its own. One source said TD's offer did not raise enough capital. Deanna Horton, spokesperson for Sherritt International, said that company's offer expired on the first of the month. Although the company could have extended that deadline, it "determined that it wasn't in our best interest to continue," she said. Sources said an offer from Russian steel giant Severstal was low. "They were basically trying to steal the company," said one person. But Severstal, which has been interested in buying Stelco for more than a year, isn't throwing in the towel yet. Stelco's announcement "is only a recommendation and just one more step along the way in the ongoing bid process," said Severstal spokesperson Ian Blair. "There are other parties that have a stake in this decision, such as the government, the union and the courts, and we will work with them going forward." An unconfirmed source said the company may increase its offer. Stelco's not entirely off the auction block yet. Stephen said "if somebody sends in a great offer, there's an obligation to look at it," but added that a sale is not what they're looking for any more. Jim Arnett, the province's adviser on steel, said he thinks Stelco will be able to raise enough money to begin addressing its pension deficit. "At the end of the day, Stelco is going to get refinanced, and as part of that process they're going to have to deal with the pension issue." He added that the government wants to see Stelco financially sound, and will be flexible in a payment plan. Stelco met with union officials on Tuesday to tell them it was rejecting the bids. The United Steelworkers welcomed the news, saying it confirmed their belief that Stelco did not need bankruptcy protection to revive itself. But the union was caught off-guard by Stelco's revelation Tuesday night that it was proceeding with the sale of its subsidiaries. tperkins@thespec.com 905-526-4620 |