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Stelco steel on shaky ground

Stelco Inc. is facing tumultuous negotiations in the weeks ahead as key stakeholders, including employees and shareholders, say the steelmaker’s restructuring plan won’t fly.

TORONTO

Stelco Inc. is facing tumultuous negotiations in the weeks ahead as key stakeholders, including employees and shareholders, say the steelmaker’s restructuring plan won’t fly.

After more than 15 months in bankruptcy protection, the company circulated a confidential plan to stakeholders late last week, outlining how it intends to raise funds, pay debts and emerge from court protection.

John Varley, a lawyer representing Stelco’s salaried employees, said Monday that the plan appears to pay “an enormous amount of attention to the present shareholders … and to the bondholders … all at the loss of the employees (and) retirees who are owed hundreds of millions of pension plan contributions.”

On the other hand, “everybody wins but the shareholder,” declared a major institutional investor who did not want to be identified.

“The shareholder takes it on the chin here, on behalf of the pensioners and the union and the government and everyone else.”

He said a new share offering would leave current stockholders with a smaller piece of Stelco’s equity and “the money that’s going into the pension fund comes from shareholders.”

Stakeholders are jostling ahead of negotiations — which CEO Courtney Pratt hopes will start next week — conducted through a mediator.

A copy of the company’s plan obtained by The Canadian Press, shows Stelco would issue $150 million in new equity. Other key elements include:

— raising $175 million from the sale of subsidiaries;

— issuing $250 million in eight-year secured bonds;

— arranging a $500-million asset-based loan facility, partly to repay secured lenders in full, $67 million plus $66 million in interest;

— repaying trade creditors and other unsecured claims in full, $153 million, but without interest.

— about $175 million to reduce Stelco’s $1.3-billion pension deficit.

The Canadian Press

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