Objections are piling up to U.S. Steel Canada's plan to sell its mills and land.
A motion setting the rules for that sale goes to court for approval Monday in Toronto, but workers and the province argue it is unfair.
Their objections focus on a footnote in the draft plan that says if any bidder's offer includes settlement of debts owed to it as part of its purchase price, the process can be frozen until that question is settled by the court.
Objectors fear that without a clear end to the sales process, potential bidders for the mills and land in Hamilton and Nanticoke will drop out, allowing U.S. Steel to buy the assets — especially the Lake Erie plant — for what it is already owed, leaving no money to be distributed to unsecured creditors or to top up the seriously underfunded pension plans.
"The way it's set up now, no bid can proceed under those rules and we don't think that's fair," said Gary Howe, incoming president of Local 1005 of the United Steelworkers. "Until that's resolved, the entire sales process can't go ahead and we think that would let U.S. Steel buy the place for what it's owed."
In its full objection, Local 1005 notes USSC's American parent is its largest secured creditor and argues if those claims become part of the bidding process, potential bidders "are unlikely to present binding offers in the context of a (process) which provides no certainty as to when their bids will be reviewed and evaluated …"
That position is backed by the union's national office and Local 8782, representing workers at the Lake Erie plant, active and retired salaried workers and the provincial government.
Lawyer Andrew Hatnay, whose Toronto firm Koskie Minsky LLP represents active and retired salaried employees, said in his objection such sales are required "to be fair, transparent and a commercially efficacious process" that allow every chance to "optimize the chances of securing the best possible price for the assets up for sale …"
Hatnay's group also worries about clauses allowing the Canadian arm to waive stipulations that require bidders to reveal how they intend to deal with pension and health benefit plans and active non-union employees.
They also say the court-appointed monitor should be required to consult with all stakeholders before allowing the company to eliminate a bidder.
The province also worried about the loss of potential bids because of credit claims.
"The credit bid clause purports to delay the review or evaluation of any binding offers in the (sales process), and by implication any further progress in USSC's restructuring," it argued. "The province submits that this could result in an unfair (process) that renders the process time frame unknown and uncertain for potential third-party bidders."
All the objectors say they're willing to negotiate a settlement to their claims, but if that's not possible, they're content to let Justice Herman Wilton-Siegel settle the issue.
The motion to be argued Monday lays out a two-stage proposal to off-load the mills by the end of this year.
Potential bidders will receive a process summary or "teaser letter" by April 13. After that, those who sign a confidentiality agreement and are deemed "likely to be able to consummate a sale, restructuring or recapitalization" will then get detailed information to be used to craft a letter of interest by May 20.
Potential buyers moving to the next step will have to submit proposals that include the price they're offering for the mills and/or the land, what they intend to do with the assets (including what they'll do with employees and their pension funds and suppliers) and how the proposed purchase is to be financed.
At any point in that process, USSC is permitted to bring a motion to court asking for a bid to be designated the "stalking horse" — one against which all others are measured.
In a separate motion, the company asks the court to approve a report setting its outstanding debts to its American parent company at $2.4 billion. That's in addition to trade creditor debts of almost $80 million. A hearing date on that motion has not been set.
In an emailed response, the company said: "The position of U.S. Steel Canada is clearly outlined in the motion materials presented to the court.
"We trust that the court will consider the various submissions and arrive at a decision that is appropriate in the circumstances.
"U.S. Steel Canada continues to work in consultation with the independent court monitor and the chief restructuring officer to maintain the dialogue with stakeholders and examine all available restructuring options. Our goal remains to implement a comprehensive operational and financial restructuring plan."
Source: thespec.com
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