Stelco told to fund C$1.3 billion pension deficit on exit from bankruptcy

New York, Feb. 10 - Stelco Inc. said it received a letter from the Government of Ontario telling it that it will have to fully fund the C$1.3 billion deficit in its pension plan on exiting bankruptcy.

However the letter from James Arnett, Ontario's special adviser on the steel industry, said the government was prepared to be flexible in discussing a plan with the company.

Stelco said that if the government simply revokes the company's benefit under section 5.1 of the Pension Benefits Act (Ontario) then the company will have to amortize the C$1.3 billion deficiency over five years.

But Arnett noted that "the government supports your auction process and, to that end, is prepared to be flexible in discussing a fair and reasonable plan for the consequent need to fund the pension deficiencies on a solvency basis."

In response, Hap Stephen, Stelco's chief restructuring officer, in a news release, said: "Our goal is a reasonable and responsible solution that will serve the best interests of the company and all its stakeholders, including the Government of Ontario, and also reflect the company's ability to make payments to reduce the solvency deficiency.

"Stelco has consistently stated that the pension funding issue is front-and-centre for the company and for the bidders. The bidders are well aware of the issue, of our view, and of the court's stated assumption that they will keep the issue in mind in making their bids."

Stelco, a Hamilton, Ont.-based steel company, filed for bankruptcy under the Companies, Creditors Arrangement Act on Jan. 29, 2004. Its case number is 04-54306.

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