Algoma unveils credit plan

Algoma Steel is expected to lay off 800-1,000 people from its workforce of 3,900.

The layoffs are part of a plan of arrangement and reorganization filed under the Companies’ Creditors Arrangement Act (CCAA). Holders of secure bonds would receive three-quarters of the company’s shares so that operations may continue.

The plan requires that Algoma employees agree to a collective bargaining agreement that would run until July 31, 2004. The agreement would include reduced wages and benefits, and fewer staff. In exchange, employees would receive 20% of a new issue of common shares.

Creditors holding $550 mortgage notes will receive new notes for $150 million and 75% of new shares. Unsecured creditors will receive $2 million in cash and 5% of the new shares, against their claims.

Shareholders will receive nothing if the deal is approved, as all existing common shares would be cancelled.

The plan is expected to save the company about $150 million per year and is contingent on discussions with the union and the province.

Since 1999, Algoma has lost nearly $357 million, including $214 million in the first six months of this year.

The plan is similar to one unveiled in the early 1990s that gave Algoma’s employees majority ownership by issuing new shares. That deal left Algoma’s major shareholder at the time, Dofasco, with massive losses totalling hundreds of millions of dollars.