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It's the first time in Stelco's 10 months of insolvency that anyone
has ever said wages, benefits and pensions are safe.
But the deal with Deutsche Bank is being met with skepticism by many
employees and pensioners, most of whom say they want to know about the
fine print before they jump for joy. Paul Wendling, spokesperson for
salaried pensioners, said, "the devil may be in the details."
There will be relief around news of the offer, but his group wants to
ensure the long-term viability of the company.
A proposal by Deutsche Bank Securities Inc. and Deutsche Bank AG --
one of Stelco's major bondholders -- to pump $900 million into the
insolvent steelmaker was approved unanimously by Stelco's board of
directors and will be filed with the court overseeing bankruptcy
protection early this week.
The terms of the deal "do not include any requirement for wage,
benefit or pension concessions from any of the company's union local,
other employees or retirees," said a statement released yesterday.
The company will proceed with sales of subsidiaries and other assets
and will continue to seek out other capital funding.
This deal is considered a "stalking horse" -- a financial
term for a proposal that opens up a bidding process. Any future bids will
be measured against it.
That's good news for employees and pensioners who have lived under a
cloud of uncertainty since the company went under court protection on
Jan. 29.
Until now, there have been no guarantees that wages, pensions and
benefits would be protected. A proposal from Russian steel giant
Severstal included provisions for negotiations with employees and
retirees.
The deal is "excellent news," said Rob Moffat, an electrical
engineer who chairs the Stelco and Subsidiaries Salaried Employees
Association (SASSEA).
"It sets a high mark. There is the opportunity for anyone,
shareholders or Severstal or whoever, to come forward and top it. It's a
really good start for all of us."
But the plan is far from a "slam dunk" because it doesn't
address the company's staggering $1.2 billion pension shortfall, said
Larry Ciancone, an executive with SASSEA and an accountant at Stelco.
"Government involvement is still needed on the pensions issue but
this avoids the route of the unknown buyer like Severstal."
The word from the bondholder that it won't need concessions from
workers shows "the embarrassment of riches the company's
suffering," said Rolf Gerstenberger, president of Local 1005 at
Hilton Works.
Stelco has had back-to-back quarters of record-making profits,
totalling $100 million.
Gerstenberger said his union will continue to fight the sale of Stelco
assets, including Stelpipe and Stelwire.
Under the Deutsche Bank plan, shareholders will likely emerge with
little or nothing, says steel analyst Paul D'Amico.
"But from a union perspective, it's as simple as it's going to
get. The union has nothing to worry about here," said D'Amico, who
studies Stelco for National Bank Financial.
Dave Christopherson, MP for the NDP in Hamilton Centre said the deal
is a "major win" for local unions who refused to consider cuts.
He said he would like to see a guarantee that Stelco will remain a force
in the city.
Restaurant owner Gary Rankin is breathing easier, knowing the crowd at
his east-end restaurant won't be stripped of Stelco workers.
"If Stelco was gone, it would be a big blow to the city and my
business," said the owner of Rankins Bar & Grill.
mmacleod@thespec.com
905-526-3408
Bidders at a glance
OAO Severstal
* Annual steel production: 12.5 million tonnes, about three times
Stelco's annual output.
* Financials: Made $597 million US in 2003 on sales of about $3.2
billion US. Had more than $1.4 billion in cash on hand as of June 30.
* Employees: About 40,000 unionized workers in steelmaking. Severstal
Group has 130,000 who work in steel, automotive, raw materials, transport
and insurance businesses.
* Chairman: Alexei Mordashov, 39, is one of the world's richest men
with net worth of $4.5 billion US, according to Forbes magazine.
* Parent company: Severstal Group, 15th in capitalization among
Russia's largest companies.
Deutsche Bank
* Deutsche Bank was founded in Berlin in 1870 "to transact
banking business of all kinds, in particular to promote and facilitate
trade relations between Germany, other European countries, and overseas
markets."
* The bank has the equivalent of $1,300 billion Cdn in assets with
more than 65,000 employees operating in 74 countries.
* More than half the staff works outside Germany.
* Deutsche Bank became Europe's largest bank in terms of assets after
it acquired U.S.-based Bankers Trust Corporation in 1999.
GMP Capital Corp.
* Toronto-based GMP Capital Corp. is an independent Canadian
investment dealer for corporate clients and institutional investors.
* GMP's predecessor, Griffiths McBurney & Partners, was founded in
March 1995.
* GMP Capital Corp. went public on Dec. 9, 2003.
* In second quarter results, pretax income was $22.6 million, an
increase of 194 per cent from $7.7 million in the same period last year
and up 45 per cent from $15.6 million the previous quarter.
Clearwater Equilibrium Investor Group
* Hedge funds Clearwater Capital Management Inc. (Clearwater Capital)
and Equilibrium Capital Management Inc. (Equilibrium Capital) formed an
investor group to make a bid for Stelco.
* Its president Roland Keiper was called the "smartest guy on Bay
Street" in a Report on Business Magazine profile.
- Spectator wire services and staff
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