Marriage proposals due Monday by firms interested in restructuring Stelco www.canada.com - Canadian Press 14.02.2005 TORONTO (CP) - Plenty of suitors will make proposals this Valentine's Day to restructure Stelco Inc., but whether they'll offer something seductive enough to entice both management and workers of the Canadian steel giant remains anyone's guess. Midnight Monday represents the long-awaited deadline for formal bids to either refinance or take over the Hamilton steelmaker, which has been restructuring under court protection from creditors for more than a year. It will be at least several days, if not weeks, for Stelco's board to announce which bid it supports, and it will be several weeks, if not months, for a final plan of arrangement to be filed in court. But the process could become quite complicated should the United Steelworkers union - which has raised quite legitimate questions about Stelco's insolvency claim from the get-go - throws its influential support behind a different bidder. "Our hope is that we have a bid that really all the stakeholders favour. But it's hard to predict what will happen," Stelco CEO Courtney Pratt told The Canadian Press, adding that a duelling of bids between management and the union is "certainly a posibility. "Depending on the nature of the situation, it may fall to the court, to (Ontario Superior Court Justice James) Farley, to try and help resolve the differences." There's no certainty, either, about how many binding offers which will actually be delivered to Stelco. At first, there were six parties examining the company's finances to try and top a $900-million "stalking horse" refinancing offer from Germany's Deutsche Bank, which may submit a new proposal of its own. That number dwindled down to five after Algoma Steel announced it had dropped out of the running, citing too many risks and "obligations." Algoma's concerns likely centred on the hundreds of millions of dollars it might have to pay after a takeover to lift Stelco's pension plan out of a $1.3-billion deficit position, especially after the Ontario government confirmed last week that it won't bail Stelco out of its pension woes. Algoma also faced resistance from the Steelworkers, with one local union official telling the Hamilton Spectator that Algoma was "way out to lunch" by asking for worker concessions the union says aren't necessary. The number of competitors to Deutsche Bank may have been reduced to four amid reports that Mittal Steel Corp. has also withdrawan from the auction. That leaves four parties - Pittsburgh-based U.S. Steel, Russia's OAO Severstal, TD Securities and a joint bid by Toronto's Sherritt International and the Ontario Teachers' Pension Plan. If ultimately the company's board and the union support different candidates, both sides will lobby to company creditors and Justice Farley over which bid should ultimately prevail. Such a difference in opinion could spark more fireworks in court between management and union lawyers. What the company wants sounds simple enough: a refinancing that raises capital for Stelco to complete various mill upgrades it says it needs to stay competitive over the next decade. It's unclear whether Stelco would support a takeover offer, given that Deutsche Bank's proposal, while giving the bank a near
one-half stake in Canada's largest steel company by volume, might still leave current management in place. What seems apparent, however, is that ultimately, for any refinancing offer to prove successful, it must address the pension plan funding shortfall. The benchmark Deutsche Bank offer does not appear to adequately address it, and various stakeholders - Farley, the Ontario government and the union - have indicated that a proposal to restore the solvency of Stelco's pension plans is of paramount importance. That would please the union, which wants nothing to do with Deutsche Bank. It applauded the Ontario government's announcement that the pension plan must be addressed without provincial help, prompting Steelworkers president Ken Neumann to say that "perhaps now Stelco will finally send the Deutsche Bank 'stalking horse' with its blatant disregard for pensioners to the glue factory where it belongs." The Steelworkers haven't really hinted which bidder they prefer but have played a big role in the auction process since Farley said the union effectively has a "functional veto" in the selection of a bidder. Union officials from various Stelco locals have been actively negotiating with the candidates - save for local 1005 in Hamilton, which has balked at participating in a sales process it doesn't believe should be happening in the first place.