Stelco and Ontario agree on pension funding solution

Stelco and Ontario agree on pension funding solution

Legally insolvent Hamilton steelmaker Stelco Inc. filed a restructuring plan today (September 20) with the Ontario Superior Court as well as a restructuring agreement with the Province of Ontario that the company hopes will appease both bondholders and steelworkers. Under the restructuring agreement, the Province would invest $100 million (Canadian CA$) in an upfront contribution towards the company’s pension plans and has agreed to a schedule of fixed annual cash payments to the plans through 2015. In return, Stelco will increase its proposed upfront contribution to the pension plans to CA$400 million from the CA$200 million contained in the company’s rejected July plan outline. The Ontario government, who felt that the company was not doing enough to address the pension deficit, subsequently rejected that plan. Stelco President and CEO Courtney Pratt said today, “The Province has shown considerable leadership and has broken the restructuring log jam by bringing a tangible pension funding solution to the table. This solution meets the stated objectives of a number of our stakeholders. It provides stability surrounding our pension funding commitments over the next decade. And it provides security and assurance for our active and retired employees.” For the agreement to be final, Tricap Management Limited must fulfill its funding agreement to provide up to CA$450 million in new financing. Stelco must also enter into a Memorandum of Agreement with each of USW Locals 8782 (Lake Erie) and 5220 (AltaSteel) by 9:30 a.m. on Thursday, September 22 or such later date as the Province, acting reasonably, may agree. Speaking with SteelOrbis, 8782 president Bill Ferguson was guarded, saying, “I’ve been around too long and seen too much to say for sure that it’s going to happen but we’re optimistically cautious.” The company said today that it is committed to continuing its efforts to conclude these agreements. The plan would provide Stelco with an estimated $630 million in net liquidity at the plan implementation date of December 31, 2005.