Stelco Inc. filed a restructuring plan Friday that the company acknowledged may be tough for stakeholders to swallow.
"We've worked long and hard to find a middle ground between competing demands," said Courtney Pratt, the company's president and CEO.
"Various stakeholders may criticize the plan because it does not provide them with everything they want. There is not enough value in the company to give every group everything it wants. The key is to provide enough that everyone can support," he said.
The Hamilton, Ont., steel company has been operating under creditor protection since January 2004. The company's protection expires on July 18 and it's asking for an extension so it can negotiate with its stakeholders.
It hopes to implement the plan on Sept. 30.
Pension deficit repaid by 2015
The plan would see the company retire its $1.3-billion pension plan shortfall by 2015. Unsecured creditors will get all of the $665 million they are owed via a combination of new equity and debt.
Current shareholders will be offered new shares of the company. They will also be offered rights and warrants to buy more equity in the future.
The plan, made public on Friday, would initially see unsecured creditors wind up with 90.9 per cent of the equity of the recapitalized firm, while existing equity holders will get 9.1 per cent.
Stelco said if current shareholders do nothing, their holdings will eventually fall to less than two per cent.
But if they exercise their share rights, they will wind up with 29.8 per cent of the firm, while unsecured creditors will hold just over 70 per cent.
$365M in new cash
Stelco also hopes to raise $175 million cash through the sale of non-core assets, $100 million from its rights offering and $90 million from warrants.
The company said its salaried and unionized workers and retirees won't be affected by its plan.
"They are not being requested to make any concessions in terms of salaries and wages or pension and other benefits," the company said in the outline of its plan.
Stelco rejected several restructuring bids from outside firms, opting to develop its own restructuring option.
- FROM March 2, 2005: Stelco rejects all 4 bids; shares surge
- FROM April 13, 2005: Stelco rejects Steelworkers/Brascan $1.35B recapitalization plan