U.S. Steel Canada proposes plan to continue operations beyond 2015

By Caroline Salls

Pittsburgh, Sept. 18 – U.S. Steel Canada Inc. will seek approval from the Ontario Superior Court of Justice to continue its operations beyond 2015 and to obtain further relief in connection with a business preservation plan under the Companies’ Creditors Arrangement Act (Canada), according to a news release.

“With a court order we can preserve work and meet obligations to approximately 2,200 employees and continue to deliver high-quality steel products to our customers from our two Canadian steelmaking facilities,” president and general manager Michael McQuade said in the release.

“The court order, if granted, also would provide additional time to find a consensual restructuring solution, and to conduct a new sale and restructuring process when market conditions improve.”

Contributing factors

Despite its best efforts under its sale and restructuring process, the company said the unwillingness of stakeholders to agree to compromises proposed in the offers submitted, and the unwillingness of bidders to modify conditions to be acceptable to stakeholders, has resulted in no executable offer being received to-date.

In addition, the company said principal stakeholders have not been able to reach a consensual restructuring agreement.

U.S. Steel Canada said these factors are further aggravated by the continued deterioration of the North American steel market and the increasing volume of offshore imports.

The company said steps taken by parent company United States Steel Corp. to reallocate Canadian production to its facilities in the United States, including some of the highly profitable steel production U.S. Steel Canada previously supplied to the auto industry, contributed to the need for the requested order.

U.S. Steel Canada said the reallocation is intended to take effect in October.

Without this court order, U S. Steel Canada said it would unlikely be able to avoid ceasing operations at the end of 2015, jeopardizing employment in Hamilton and Nanticoke.

Proposed actions

Under the terms of the proposed order, the parent company would be directed to continue to provide all intercompany services and goods, and U.S. Steel Canada would immediately discontinue the current sale and restructuring process, with the exception of bids related to land at its Hamilton Works.

The company said it plans to re-run the sale and restructuring process at an appropriate time in late 2015 or 2016.

Given the need to conserve cash for the survival of the business, U.S. Steel Canada said it also is asking the court to authorize the immediate suspension of all pension funding contributions, except contributions for current service, to suspend payment of post-employment health, medical, dental and life insurance benefits in the near term for retirees, surviving spouses and dependents and to immediately suspend all real property tax payments.

Pension payments from the U.S. Steel Canada registered pension plans and funded supplementary pension plans will continue to be made to retirees and surviving spouses at this time and are not impacted by this motion. However, supplementary pensions paid directly by U.S. Steel Canada to retirees and surviving spouses will be suspended.

Under the motion, Ernst & Young Inc. would continue as the court-appointed monitor to oversee the business and financial affairs of the company during the CCAA process.

Hamilton, Ont.-based U.S. Steel Canada’s operations are located at Lake Erie Works, a fully integrated steelmaking facility, and at Hamilton Works, a cokemaking and finishing facility. U.S. Steel is a Pittsburgh-based steelmaker.

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