Rail Associates Agreement Ends

The province has terminated the agreement with Rail Associates Inc. for the purchase of the Sydney Steel Corporation. The minister responsible for Sysco, Gordon Balser, made the announcement today and said receivers Ernst & Young will be called in to sell the plant.

The decision follows a recommendation earlier today from Sysco's Board of Directors. The board will continue to play an important role in the ensuing process.

"Serious concerns about Rail Associates and their ability to run the steel plant have arisen in recent days. The decision to terminate the agreement is in the best interests of Sysco workers and the taxpayers of Nova Scotia," said Mr. Balser. "We could not do a deal that leaves workers out on a limb and taxpayers reaching into their pockets."

Last week Rail Associates breached the nine-page agreement signed on Dec. 31 by failing to provide a deposit of $1.5 million. In addition, Rail Associates wanted to renegotiate certain terms of the agreement to gain access to $9 million of taxpayer funding remaining in Sysco's line of credit. Since signing the agreement, there have been significant changes in membership of the consortium, and Rail Associates has ignored government's requests that members of the consortium sit down and talk with the Sysco union.

"Without question, this was a difficult decision," said Mr. Balser. "We are committed to treating workers with the fairness and respect they deserve. We have a process in place to ensure a thoughtful, planned approach."

Mr. Balser and Premier John Hamm delivered the news to union president Bill MacNeil. A meeting has been scheduled between the minister and the union for tomorrow.

That meeting will discuss how matters at Sysco proceed from here, said the minister. "The bottom line remains the same. The province is getting out of the steel business."

The receiver will manage the sale of Sysco's assets, evaluating the bidders' prospects for operating the plant into the future in addition to purchase price. Sysco will continue to operate until outstanding orders are complete.

The search for a buyer for Sydney Steel actively began nine months ago with the hiring of ABN Amro, a Dutch investment bank. The company approached more than 100 firms worldwide. Detailed packages were sent to eight parties in September 1999 after qualifying as bidders based on the bank's assessment of their financial and management resources as well as their steel-making ability.

"ABN assured us we had a credible buyer based on careful screening," said Mr. Balser. "We are disappointed that this is not the case."

When the current government came to office, the process to sell Sydney Steel was already underway.

Sysco became a crown corporation on December 19, 1967. In its 30-year history it has cost taxpayers approximately $3 billion. Efforts to privatize the Crown Corporation have been underway since 1992.