Steam billows from a stack at the U.S. Steel Canada plant in Hamilton in this file photo taken March 4, 2009.Mike Cassese/Reuters
United States Steel Corp. could sell all or part of the assets of U.S. Steel Canada Inc., as it restructures its Canadian unit, which was granted protection from creditors Tuesday under the Companies' Creditors Arrangement Act.
U.S. Steel Canada, (USSC) consists of the operations of the former Stelco Inc., that U.S. Steel purchased in 2007. The filing culminates almost seven years of turmoil at what was once Canada's largest steel maker and one of the country's blue-chip manufacturers. Since the takeover of Stelco, U.S. Steel has locked out employees at operations in Hamilton, Ont., and Nanticoke, Ont., and engaged in a battle with the federal government companies--later settled--over whether the steel giant was breaking promises it made to Ottawa when it bought Stelco.
"The stay of proceedings and related relief sought in this application will provide USSC with the necessary 'breathing room' to allow it to carry out a restructuring, including continuing discussions with its key stakeholders," U.S. Steel Canada said in a court filing, "and to explore restructuring solutions including, potentially, a consensual restructuring of certain material obligations, a sales process to solicit interest in purchasing all or part of USSC's business, and/or other restructuring processes."
The company filed for protection after racking up losses before interest, taxes, depreciation and amortization of $1.5-billion between 2008 and 2013, it said in the filing. That period included the recession of 2008-2009, when steel demand shrank dramatically in North America as auto makers slashed production and construction slowed to a trickle.
Stelco went through a protracted and bitter restructuring under the CCAA that began in 2004, at the time citing a looming pension deficit.
U.S. Steel Canada noted a similar pension crisis in its court filings Tuesday, saying its pension plans for workers in Hamilton and its Lake Erie works in Nanticoke face a solvency deficiency of $838.7-million.
Liabilities for other employee benefits amount to $787.9-million.
Interest payments of $162.5-million are due to U.S. Steel by the end of the year, Paul Steep, a lawyer for the Canadian unit, told the Ontario Superior Court of Justice Tuesday evening.
The parent company is prepared to provide debtor-in-possession financing of $185-million, which should be sufficient through the end of 2015, Mr. Steep said.
A $150-million loan to Stelco made by the Ontario government to help finance annual pension payments, was assumed by U.S. Steel and is due at the end of 2015.
Steel making at the Hamilton operations was halted in 2010 and U.S. Steel has since permanently shut the blast furnaces.
About 600 unionized workers are employed at the Hamilton operation and another 1,100 work at the more modern steel mill and a pickling line in Nanticoke. There are 425 salaried employees between the two mills and 169 corporate employees.
There are about 9,000 retirees from the Hamilton mills.
The Canadian division has appointed a chief restructuring officer to guide the operation through bankruptcy protection under the Companies' Creditors Arrangement Act.
Rolf Gerstenberger, who heads local 1005 of the United Steelworkers union, said the Pittsburgh-based giant has been scheming to shut down production in Canada since it bought Stelco in 2007.
"Local 1005 has no intention of remaining silent on this matter," said Mr. Gerstenberger, whose local represents the active unionized workers and unionized retirees of the Hamilton mills.
Alex Morrison, of Ernst & Young, who was the court-appointed monitor during Stelco's CCAA process a decade ago, has also been appointed to that position again.
U.S. Steel said last October that it would officially cease steel production at its Hamilton mill at the end of 2013, ending more than a century of steel making at the site.
The steel industry is currently grappling with oversupply and uncertain demand as China's economic growth cools.
The U.S. parent signalled in July that court protection for the Canadian unit was a possibility. The company took a series of steps with a group of lenders and note holders to exclude a default by U.S. Steel Canada on debt of more than $300-million (U.S.) from triggering a general default, regulatory filings showed.
Although the debt holders were offered cash, they refused to agree to a plan to exclude a bankruptcy filing by the Canadian unit from triggering a default.
If the noteholders trigger a default, U.S. Steel will pay the notes out in cash, the company said.
The July filings came after the company asked Mr. Gerstenberger and other union representatives in Hamilton and Nanticoke to engage in confidential negotiations about restructuring the Canadian operations. However, the union refused to sign a confidentiality agreement.
With the shutdown of steel-making operations at the end of last year, active operations in Hamilton now consist of coke making, a cold mill and galvanizing line, and the Z-line, which finishes steel for such uses as body panels on cars.
The company still produces steel and operates finishing facilities in Nanticoke.