U.S. Steel Canada Inc. has found a new lender to finance its trip through creditor protection after complaints by stakeholders that the steel maker's parent company has exercised too much control over the restructuring.
The Canadian unit of United States Steel Corp. (USS) says it wants the Ontario Superior Court to approve Brookfield Capital Partners Ltd. as the provider of debtor-in-possession financing, replacing its parent company.
The parent company has acted in many roles since U.S. Steel Canada (USSC) was granted protection under the Companies' Creditors Arrangement Act (CCAA) last September, including sole owner of the Canadian unit, ultimate provider of debtor-in-possession financing and a potential bidder in the sales and restructuring process, USSC said in a court filing.
"As a result of the multiple roles of United States Steel, in relation to USSC, some interested parties have expressed concerns about the degree of influence USS has over USSC in its role as parent to the DIP lender," the filing said.
Among those opposed to the multiple hats the parent company has been wearing are its unionized workers, active and retired salaried employees and the Ontario government.
Those groups are key to the restructuring because any buyer of the assets of U.S. Steel Canada, which include mills in Hamilton, Ont., and Nanticoke, Ont., will have to address pension deficits of more than $800-million. Those deficits will have to be eliminated over the next five years under Ontario government pension regulations or a deal reached with the government to lengthen out the payments.
Bill Aziz, U.S. Steel Canada's chief restructuring officer, said in a court filing that the Canadian unit and its parent company have at times faced difficult negotiations as USSC sought approval of Pittsburgh-based U.S. Steel for actions it wanted to take while under creditor protection.
"On occasion, the resolution that [USSC] reached with USS to obtain the DIP lender's consent resulted in objections from stakeholders," Mr. Aziz said. "Some stakeholders also questioned whether funding would be advanced under the USS DIP facility when needed or whether future disputes over alleged defaults would occur."
Earlier this month, court filings show, the two companies disputed whether U.S. Steel Canada was in default of the terms its parent company set when it agreed to finance the company through the CCAA process.
Brookfield is prepared to provide $150-million in financing that will carry an interest rate of about 12 per cent.
Brookfield officials would not comment when asked why they are prepared to jump in.
But it's a return by Brookfield to financing what is essentially the same company in which Brookfield Assets Management Inc.'s Tricap Management Ltd. fund took a position in the 2000s.
Tricap bought a stake in Stelco Inc. and picked up a return of about $375-million when U.S. Steel bought Stelco for $1.1-billion in 2007.
The steelworkers union played a key role in convincing Tricap to participate in the Stelco restructuring under the CCAA before it was taken over by U.S. Steel and said it approves a replacement lender.
"We believe the sale and restructuring process has been skewed in U.S. Steel's favour," said Marty Warren, Ontario director of the United Steelworkers union, which represents workers at the two mills and other smaller operations in Hamilton and Nanticoke.
The union said it is also seeking more details of proposals by as many as 39 potential bidders for all or part of U.S. Steel Canada's assets.