A U.S. metals and mining company is offering to invest about $500-million to purchase U.S. Steel Canada Inc. and keep the troubled steel maker operating.
Bedrock Industries LP has emerged from among several contenders as the Ontario government’s preferred candidate to complete the restructuring of U.S. Steel Canada, which is now into its third year.
Miami-based Bedrock is prepared to restructure the company with a cash infusion, a pension contribution and payments to the province of Ontario and U.S. Steel Canada’s former parent, United States Steel Corp., said sources familiar with a deal reached between the province and Bedrock.
The deal is supported by the national office of the United Steelworkers union (USW) and gained qualified support from other stakeholders that have participated in the company’s saga of protection under the Companies’ Creditors Arrangement Act.
U.S. Steel Canada’s chief restructuring officer William Aziz called it an important step forward.
A final restructuring agreement is subject to full agreements from several stakeholders, notably the two locals of the USW that represent workers at mills in Hamilton and Nanticoke, Ont.
In addition, the Ontario government will seek what amounts to an exit agreement from Pittsburgh-based U.S. Steel that will help pay for some of the environmental liabilities left from more than a century of steel making in Hamilton and 30 years of production in Nanticoke, on the north shore of Lake Erie. U.S. Steel took over Stelco Inc. in 2007 and put the Canadian unit into creditor protection in September, 2014.
The Ontario government is a key stakeholder because of a $150-million loan it made to U.S. Steel to help finance a pension deficit when the company took over Stelco.
U.S. Steel Canada cited pension solvency deficiencies of $840-million when it filed for CCAA protection, which could be dumped into the lap of the province’s Pension Benefits Guarantee Fund if the company is liquidated.
“The next core step is we have to resolve the environmental issues,” said a source familiar with the transaction, who said he would not reveal specific elements of the deal. “This will be Canada versus U.S. Steel. Are they going to leave ugly or well?”
Other sources familiar with the agreement said the Bedrock offer includes a payment to U.S. Steel, which, in the court proceedings, has made a claim against its former unit.
The deal also includes payments to help cover health care costs of 14,000 unionized and salaried retirees, a key issue for the national office of the USW and its two locals. Those benefits, earned when the retirees or surviving spouses worked for Stelco or U.S. Steel, were eliminated during the court-supervised restructuring, although they were partly restored through a trust fund that included money from the provincial government.
The two operations employ about 1,750 unionized workers and there will be little impact on jobs, while wages will not be cut, the sources said.
USW Local 1005, which represents workers in Hamilton, said it has many concerns about the deal, including whether payments will be made to restore the health of the pension fund. The local also wants a full restoration of health care benefits.
David Cheney, a board member and principal of Bedrock, said the company believes U.S. Steel Canada has high-quality assets and strong management and labour teams.
“We intend to allow them to execute their plan and execute their ideas,” Mr. Cheney said.
He said he could not talk about the details of the transaction.Report Typo/Error