Steelworkers go to court to fight Stelco

The following news release was issued today by United Steelworkers Association, in response to Stelco Inc.'s, recent announcement.

The ateelworkers are filing an objection to Stelco Inc.'s motion for approval of a Deutsche Bank proposal and seeking modifications to capital-raising and sale processes.

********************** Union opposes inferior proposal that undermines company's obligations to workers and retirees

TORONTO - The United Steelworkers has filed with the Ontario superior court its objection to Stelco Inc.'s motion to seek approval for the financing commitment offered by Deutsche Bank (the Deutsche Bank Commitment).

In an affidavit by National Director Ken Neumann, the union says the Deutsche Bank commitment puts unsecured creditors ahead of pension obligations and does not satisfy the requirement of the October 19 Capital Process Order for a financing proposal that generates no less than $200-million worth of proceeds to Stelco.

"The Deutsche Bank Commitment... in fact leads to a reduction of $100-million in liquidity...," says the affidavit.

"The Deutsche Bank Commitment is in effect a swap of unsecured debt for secured debt, which jeopardizes or compromises employee future benefits and the unfunded pension liability."

The affidavit goes on to point out that Stelco has repeatedly claimed that $900 million in Employee Future Benefits and $1-billion in unrecorded unfunded pension liabilities were reasons for filing for protection under the Companies Creditors Arrangement Act (CCAA). These amounts are now compromised since secured debt, which will be significantly increased under the Deutsche Bank Commitment once Stelco emerges from CCAA protection, come first ahead of employees' claims against Stelco.

"...the commitment mandates the payment of $400-million, plus shares to be issued, to other unsecured creditors, which includes senior noteholders and convertible debenture holders, a group that may include Deutsche Bank and its affiliates.

"The Deutsche Bank Commitment is simply Deutsche Bank paying itself and converting its debt from an unsecured to a senior secured position."

The union also seeks to have the October 19 Capital Raising and Asset Sale Process amended for a more open and transparent process, to:

-Permit parties interested in making proposals for Stelco to have immediate and unfettered communication with the union and other key stakeholders;

-Remove the requirement for other parties' permission or attendance at such meetings between interested parties and the Steelworkers and other stakeholders;

-Mitigate the problems associated with the conflict of interest of existing entrenched management in the process;

-Properly test the market for the value of Stelco and to encourage the participation of parties who are interested in the potential acquisition of Stelco, including its subsidiaries, on a going-concern and long-term basis.

The union wants full and frank discussions with potential bidders to elaborate on labour relations at Stelco and identify solutions to the benefit of the future owners of the company and the interests of workers.

The affidavit reiterates the union's position that Stelco should be restructured as a single entity and not sold off in parts.

"The Stelco Motion seeks to amend the process to permit the marketing and selling off 'non-core assets', including some of the subsidiary companies. It is evident that management is directing the process to a particular outcome, while eliminating or reducing the potential for interested parties to acquire the entire Stelco operation, including its subsidiaries, on a going-concern basis. By favouring this one particular outcome, management is reducing the potential value of Stelco by failing to test the market for the operation as a whole, which is contrary to the intent of the court's decision on October 19, 2004."

For full text of the affidavit, go to uswa.ca.

**********************