The US Steel Hamilton Works plant is now under creditor protection, as seen in Hamilton on September 17, 2014.J.P. MOCZULSKI/The Globe and Mail
The finish line is in sight in the long restructuring of United States Steel Canada Inc., after the Ontario Superior Court approved holding votes on a plan by Bedrock Industries Group LLC to purchase the steel company.
The restructuring saga, which began in September, 2014, when United States Steel Corp. placed its Canadian unit under the protection of the Companies' Creditors Arrangement Act, has reached the point where Bedrock has a deal with several stakeholders on a plan that will be submitted to creditors for a vote next month.
U.S. Steel Canada, now called Stelco Inc., "will continue with substantially all of its producing assets and operations emerging as a stand-alone steel manufacturer with a restructured balance sheet and sufficient liquidity to enable it to compete in a challenging steel market," William Aziz, the company's chief restructuring officer, said in a court filing.
The plan is opposed by local 1005 of the United Steelworkers union, which represents workers and retirees of the company's Hamilton Works. Local 1005 is opposed to cuts in retiree benefits that were made earlier during the restructuring and are not expected to be restored if the deal wins final approval.
"Local 1005 will continue to fight for the earned rights of its members and will not lay down during this rigged process," the local said in a statement Wednesday.
Local 8782, which represents workers at a mill and pickling operation in Nanticoke, Ont., supports the plan.
Mr. Aziz noted that "affected creditors will derive a greater benefit from implementation of the plan than they would derive from a bankruptcy or liquidation of USSC."
The Bedrock plan involves a payment of $130-million to Pittsburgh-based U.S. Steel, which paid $1.1-billion to buy Stelco in 2007 amid a global consolidation of steel companies that led to the sale of Canada's five largest steel makers, all of which were Canadian controlled.
The U.S. Steel payment eliminates its secured claim. It is also relieved of any environmental liabilities arising from its ownership of the company.
The Canadian unit will make a $61-million payment to the Ontario government, which held a claim against the company because of a loan made to Stelco to finance pension payments. That loan was assumed by U.S. Steel, but not paid off. The government will lend $66-million to the new company to help finance post-retirement benefits.
Stelco will contribute a $30-million lump sum to the pension funds, plus $10-million annually for five years and $15-million a year after that to a maximum of $160-million, according to the restructuring plan.
The pension plans and retiree benefits will also be financed by the sale of land in both Hamilton and Nanticoke, to a maximum of $400-million.
A liquidation analysis says the land at the two operations has a value of $79-million.
When U.S. Steel Canada was granted CCAA protection, it cited a pension deficit of $837-million.