Stelco proposal ‘ doomed to fail,’ debtholdersays

A Stelco Inc. debtholder warned yesterday the company’s latest restructuring plan is “doomed to fail” because it asks creditors to give up too much.

In an affidavit filed yesterday, Matthew Heckler, vice-president of Wexford Credit Opportunities Fund, said Stelco shut creditors out of talks aimed at ending 20 months of creditor protection.

Stelco’s plan was filed this week. Wexford owns $26-million worth of Stelco’s 8% and 10.4% debentures, the affidavit said, adding that creditors are the only party that can vote on the deal.

“ The proposed plan is the tainted product of a negotiation conducted in secret and without any meaningful input or involvement of anyone who will actually be voting on it,” the affidavit said. “ Without substantial amendment, it is doomed to fail.”

Stelco did not seek out competitive bids for Tricap Management Ltd.’ s $450-million financing and its employees make no concessions under the plan, Mr. Heckler said.

“[The plan] does not represent an equitable or even reasonable sharing of the pain,” he added.

Mr. Heckler also questioned a corporate governance agreement with the United Steelworkers, which suggests Stelco’s new board must be approved by the Ontario government as part of a $100-million loan offer.

Meanwhile, Mr. Justice James Farley of the Ontario Superior Court of Justice held off granting a request for more time to finalize Stelco’s restructuring plan.

A court hearing is scheduled for today.

Financial Post

pbrieger@ nationalpost. com