Sherritt, teachers’ pension fund offer Stelco bailout

Sherritt International (S-T) and its partners at the Ontario Teachers’ Pension Plan are offering a recapitalization plan to financially troubled steelmaker Stelco, currently in bankruptcy protection.

Under the plan, Sherritt and the pension fund’s Island Energy Partnership would take over the utility and power-generation assets of Stelco, underwrite an equity rights issue to present Stelco shareholders and creditors, and take up a shareholding in Stelco. The partnership would also provide loan facilities.

Sherritt and Ontario Teachers estimated the size of the package at $1.8 billion. The only rival plan so far, proffered by Deutsche Bank, was worth about $900 million.

Island Energy would own large land packages at Nanticoke, Ont., and Hamilton, permitting it to build thermal-electric plants and to co-generate electricity at an expanded coking plant at Nanticoke. Furnace gases now being released would be drawn off for electricity generation as well. The partners say they plan to provide the power to Stelco at below market prices.

Pension liabilities, a major issue for Stelco, would be the subject of negotiations between the partners and the United Steelworkers.