Creditors of United States Steel Corp. will vote on a restructuring plan Thursday that would take the company out of creditor protection and permit its takeover by Bedrock Industries Group LLC.
But a key element of the restructuring plan has not been settled: new collective agreements with United Steelworkers of America locals at mills in Hamilton, Ont., and Nanticoke, Ont.
The steel company, which has reverted back to the Stelco Inc. name it had for more than a century before being taken over by United States Steel Corp. in 2007, is negotiating with the two locals, with Bedrock in the background.
There has been little opposition to the plan from creditors that have submitted proxy votes, Kevin Zych, a lawyer for the monitor overseeing the restructuring process under the Companies' Creditors Arrangement Act, told an Ontario Superior Court hearing Wednesday.
But the plan is conditional on new collective agreements.
"The collective agreement is a condition and continues to be a condition," Justice Herman Wilton-Siegel told lawyers before approving an agreement under which active and retired salaried employees will support the restructuring plan.
Gary Howe, president of USW local 1005, which represents workers at Hamilton and more than 10,000 retirees from that operation, said the local submitted proposals on a new contract to the company earlier this month but has not heard back from company negotiators.
In preliminary talks, Stelco had not insisted on wage cuts, Mr. Howe said. The Hamilton local's focus is on restoring health care and other benefits for workers and retirees, which the company stopped funding directly in a cash conservation move taken about a year into the restrucutring process, which began in September, 2014, with the CCAA filing.
The $200-million in cash that Stelco now has on hand should be used to help restore full health-care benefits, he said.
Bill Ferguson, president of USW local 8782 at the Lake Erie Works in Nanticoke, said his local's bargaining with Stelco has been completed except for agreements on pensions and benefits.
Bedrock, a privately held Miami-based metals and mining company, has also won the support of the Ontario government and the court-appointed monitor for its plan to take over Stelco, which U.S. Steel purchased for $1.1-billion. The Pittsburgh-based giant cut its Canadian unit loose in October, 2015.
The Bedrock plan includes a $30-million upfront payment to Stelco's pension plans, another $10-million a year for the five years beginning Jan. 1, 2017, and $15-million annually for 15 years beginning in 2022.
Another upfront payment of $30-million will be made to finance health care and other benefits along with $15-million in annual contributions and 6.5 per cent of free cash flow to a maximum of $11-million.
Bedrock will make a $61-million (U.S.) payment to the Ontario Ministry of Environment and Climate Change to cover potential environmental liabilities and would pay off the $120-million (Canadian) secured claim held by U.S. Steel.
New funding to help pay down the deficit of more than $800-million in Stelco's pension plans would come from the sale of excess land, mainly in Hamilton.