USW stands up to Paulson & Co in Algoma cash battle

USW stands up to Paulson & Co in Algoma cash battle

Algoma Steel has a lot to be thankful for this week – particularly, the United Steelworkers (USW). After Algoma Steel's largest shareholder, Paulson & Co, called a special meeting last week to force the company to divvy up its cash reserves to shareholders, the USW has filed a motion with the Ontario Supreme Court to stop the forced payout. Steelworker District 6 Director Wayne Fraser told reporters today, "You can't run a steel company like a cash machine. Steel companies need cash to operate... Raiding cash during good times is short-sighted and counter to the long-term interest of the company." The union maintains that Algoma is particularly financially vulnerable at this time, as it has unfunded pension and health care benefit liabilities and has been operating at a loss of $10 million per month since steel prices started softening. Algoma Steel company records show that a capital investment of $50 million a year is required just to keep the operation running. Paulson, which owns 19 percent of Algoma's stock, wants to exchange 40 percent of its shares for $26 apiece in cash, and exchange the remaining 60 percent for new shares in the company. Paulson also wants Algoma to refinance some of its debt. Algoma has rejected the offer.