The Ontario government will lend Stelco Inc. $100-million and could end up owning a piece of the steel maker, in a deal that forms the basis of a restructuring plan the legally insolvent company unveiled yesterday.
The plan to refinance Stelco, bearing support from the government and almost certainly the United Steelworkers union, is a breakthrough after a 20-month roller-coaster ride through creditor protection that involved battles between the union, other stakeholders and company management at virtually every turn.
The government will support the plan if Hamilton-based Stelco meets certain conditions, including using that $100-million -- as well as $300-million of its own cash -- to pay down its $1.3-billion pension solvency deficiency. The company must also sign a deal with a Brascan Corp. restructuring fund for $450-million in new financing, and reach new labour agreements with two locals of the United Steelworkers by 9:30 a.m. tomorrow.
The province will receive warrants that can be converted to Stelco shares and would give Ontario 8 per cent of the equity if they are exercised. The steel maker also has an option to pay the annual 1-per-cent interest on the $100-million loan in shares.
Ontario Finance Minister Greg Sorbara said in an interview yesterday that the province's financial commitment was critical to the success of the restructuring plan.
He said the government examined the consequences of a restructuring plan failure for the employees and pensioners of Stelco, as well as the city of Hamilton and the overall Ontario economy.