HAMILTON, ON, Aug. 10 /CNW/ - Stelco Inc. (TSX:STE) today filed material
with the Superior Court of Justice (Ontario) opposing the USW International's
bid to enable any creditor to prepare and file a restructuring plan in the
matter of the Company's CCAA process. The USW International motion is to be
heard by the Court on August 16, 2005.
In an affidavit ("the affidavit") sworn by Hap Stephen, Stelco's Chief
Restructuring Officer, the Company said that, among other things, the plan
supported by the USW International is not achievable, and that the USW
International seems prepared to see Stelco broken up and Hamilton suffer in
pursuit of a political agenda that has severe consequences for the Company's
stakeholders.
Not an affected creditor: The affidavit states that the USW International
is not an affected creditor for the purposes of a CCAA plan. In the matter of
the Company's pension obligations, for example, the affidavit notes that the
Company has made all of the required contributions to its pension plans, has
made all of its pension payments to retirees, and has indicated that no
changes to pension benefits are even being proposed. Stelco has only proposed
that in any pension funding agreement relating to accelerated contributions,
future increases in pension benefits be postponed until the funding of the
pension plans has reached an acceptable level under the Company's pension
funding plan.
The USW speaks for a minority of unionized employees: The affidavit notes
that the USW International speaks for a minority of the Company's unionized
employees. Only one of the five union Locals for which the USW International
apparently speaks - Local 8782 at Lake Erie - actually represents employees of
Stelco Inc. and its core operations that are being restructured. The affidavit
notes that the pension plan for Local 8782 represents only about 10% of the
Company's pension windup deficiency of $1.3 billion.
The plan supported by the USW International is not achievable: The
affidavit notes that the restructuring plan supported by the USW International
is simply not achievable. A number of unsecured creditors, which include local
trade suppliers and other community businesses, have stated repeatedly that
they will not vote to approve a plan so blatantly designed to improve the USW
International's own position at the expense of other legitimate stakeholders.
The affidavit observes that the USW International does not seek equal
treatment of all stakeholders. It offers no concessions, it seeks to open
collective agreements and it seeks to obtain economic improvements for the
union Locals it apparently represents. The affidavit notes that while Stelco's
plan outline proposes full recovery for general unsecured creditors, the plan
supported by the USW International only provides 47% recovery without the
exercise of the rights and 63% if they invest additional funds and exercise
the rights offering.
Risking Stelco and Hamilton to advance a political agenda: The affidavit
notes that, in light of the clear position taken by other creditors, the USW
International's strategy seems to entail the failure of the CCAA process and
the imposition of a Court-ordered sale of Stelco's assets. The affidavit notes
that the USW International's pronounced preference for a consolidated
continental steel industry may be at odds with the views of other Stelco
employees, including the employees and retirees of the Hamilton operations.
The affidavit observes that the USW International has indicated that it
would accept a Court-supervised liquidation sale of Stelco assets if a
consensual restructuring is not achieved. This could place a number of the
Hamilton and other non-Lake Erie operations at risk of failing to attract an
offer that would see those operations survive intact. The affidavit notes that
the Hamilton facility is one of the least competitive steel mills in North
America and would be more at risk in a consolidation of the industry.
The affidavit notes other consequences of a Court-ordered liquidation
sale of assets. These consequences include a process that could take many
months to complete, that could jeopardize financing of the business due to the
risk of value erosion, that could see a deterioration of the business through
the loss of customers and suppliers, and that could cause the departure of
skilled technical and other employees in response to the uncertainties caused
by the process itself.
Working to meet the needs of all stakeholders: Commenting on the
situation facing the Company, Stelco President and Chief Executive Officer
Courtney Pratt said, "Stakeholders are risking the survival of the Company and
thousands of jobs by their failure to adopt the middle ground or by the
pursuit of their own political goals."
"The Company is required by law to balance the interests and competing
demands of all stakeholders," Mr. Pratt noted. "That's why our plan outline,
which can't give every group everything it wants, tries to provide something
for everyone. And while we are, in fact, willing to entertain revisions to
that outline, we cannot accept changes that would improve the position of one
group at the expense of another."
"It's time for the USW International, the Locals it represents and all
other stakeholders to decide once and for all whether they wish to see Stelco
emerge from its restructuring as a single and viable Company," Mr. Pratt
added. "A consensual restructuring can still occur, but only if people want it
to happen and are willing to come together to make it happen."
About Stelco
Stelco Inc. is a large, diversified steel producer. Stelco is involved in
major segments of the steel industry through its integrated steel business,
mini-mills, and manufactured products businesses. This news release may
contain forward-looking information with respect to the Corporation's business
operations, financial performance and conditions. Actual results may differ
from expected results for a variety of reasons including factors discussed in
the Corporation's Management's Discussion and Analysis section of the
Corporation's 2004 Annual Report. To learn more about Stelco and its
businesses, please refer to our Web site at www.stelco.ca.
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