The restructuring of U.S. Steel Canada Inc. will go ahead with its parent company providing $185-million in financing to support the Canadian unit through the end of next year.
The steel maker, operating under the protection of the Companies’ Creditors Arrangement Act (CCAA), has won approval of the Ontario Superior Court to receive debtor-in-possession (DIP) financing from United States Steel Corp.
The original plan for that financing was opposed by the Ontario government, the United Steelworkers union and the city of Hamilton, all key stakeholders in the restructuring, but a deal that appears to satisfy their concerns was worked out during two days of negotiations among lawyers.
Ken Rosenberg, a lawyer for the union, told Justice Herman Wilton-Siegel of the Ontario Superior Court that the union will no longer oppose the financing plan but does not consent to it.
“We are not continuing to oppose,” Mr. Rosenberg said after several days of negotiations among lawyers.
But it’s important to go ahead with the restructuring, he said, and the DIP financing will provide stability while the union tries to make sure $1.4-billion to $1.5-billion in pension commitments and other postemployment benefits are secure.
Sharon White, a lawyer for local 1005 of the union, which represents about 600 active workers and 10,000 retirees from U.S. Steel Canada’s Hamilton Works, said the local has also agreed to stop opposing the financing plan.
Ms. White noted at a Toronto hearing, however, that “there is a history of broken promises of United States Steel and United States Steel Canada.”
The Pittsburgh-based steel maker made promises on capital spending and steel production under the Investment Canada Act when it purchased what was then Stelco Inc. in 2007. But it failed to meet those commitments when the recession hit in 2008 and the federal government sued the company.
The two sides later settled out of court in a settlement whose details remain secret.
Robert Chadwick, a lawyer for the Ontario government, said changes to the original financing plan have addressed his concerns and the loan provides stability during the restructuring.
But the future of U.S. Steel Canada beyond 2015 when the DIP loan expires and the company is scheduled to emerge from CCAA must be settled during the restructuring talks, Mr. Chadwick said.
The province and the union had argued that such financing gave U.S. Steel too much power in the restructuring of its Canadian unit, in part because its DIP loan would rank ahead of the company’s deficit-ridden pension plans and the costs of any environmental cleanup at the Hamilton Works, which are a century old.
The company was granted an extension of creditor protection until Jan. 23, 2015.
“The extension of the stay period provides time for U. S. Steel Canada to engage in discussions with stakeholders to explore restructuring options and reach consensual restructuring solutions where possible,” William Aziz, U.S. Steel’s chief restructuring officer, said in a statement.
The company’s Hamilton Works are responsible for the bulk of the company’s $839-million pension solvency deficiency. The Ontario government is concerned about being left on the hook for bailing out those pension plans if they are wound up and also about a potential environmental liability at the Hamilton mills.
Union official believe the company plans to shed the Hamilton assets and keep the newer Lake Erie Works, which began producing steel in 1980.
Both sets of assets are owned by U.S. Steel Canada, which means the parent company would have to purchase the Lake Erie Works from the Canadian unit.
Source:theglobeandmail.com
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