U.S. Steel Canada seeks pro­tec­tion ex­ten­sion

United Steel­work­ers lead­ers want bid­ding process re­opened so In­dia-based Es­sar Global can make a new of­fer

The Hamilton Spectator - - COMMENT - STEVE ARNOLD sarnold@thes­pec.com 905-526-3496 | @arnol­datTheSpec

U.S. Steel Canada’s court-ap­pointed over­seers want an­other three weeks to find a po­ten­tial buyer for the com­pany.

In a new court fil­ing the ad­vis­ers strug­gling to re­struc­ture the com­pany un­der cred­i­tor pro­tec­tion also ask for that shield to be ex­tended to Nov. 30, say­ing they ex­pect it will be the end of the year be­fore ev­ery­thing needed to re­vive the com­pany can be done.

The new mo­tion was filed a day af­ter a lead­ing bid­der with plans to merge the for­mer Stelco and Al­goma sud­denly dropped out of the process.

In an af­fi­davit sup­port­ing the shield ex­ten­sion, chief re­struc­tur­ing of­fi­cer Bill Aziz said the team work­ing to re­shape U.S. Steel Canada re­tains “a strong pref­er­ence for a suc­cess­ful go­ing-con­cern trans­fer of the en­tire busi­ness,” but reach­ing that tar­get will take longer than planned.

Sources say KPS pulled out of the process af­ter fail­ing to reach an agree­ment with the pro­vin­cial govern­ment over fund­ing of $1.3 bil­lion in pen­sion fund short­falls at both steel com­pa­nies. That hur­dle also led to the elim­i­na­tion of Es­sar Global, the In­dia-based con­glom­er­ate that also wanted to merge U.S. Steel Canada and Al­goma.

Of­fi­cial doc­u­ments filed in U.S. Steel Canada’s re­struc­tur­ing have been ex­tremely light on de­tails of the sale and in­vest­ment so­lic­i­ta­tion process, in­clud­ing how many suit­ors re­main.

In an up­date to em­ploy­ees this week com­pany pres­i­dent Mike McQuade went a small step fur­ther in say­ing the sales process “is con­tin­u­ing as mul­ti­ple bid­ders con­tinue their dis­cus­sions with key stakeholders.”

Sources have said a New York in­vest­ment fund called Bedrock In­dus­tries re­mains in­ter­ested in the com­pany while a mys­te­ri­ous Ger­man firm con­tin­ues to cir­cle, look­ing for a way into the bid­ding process. There has been no in­for­ma­tion at all on bid­ders in­ter­ested only in parts of the pack­age, such as its 7,400 acres of land in Hamil­ton and Nan­ti­coke.

De­spite be­ing cut from the auc­tions in both Hamil­ton and Sault Ste. Marie, Es­sar Global con­tin­ues to have the sup­port of United Steel­work­ers lead­ers who said Fri­day they want the bid­ding process re­opened so the In­dia-based com­pany can make a new of­fer.

Es­sar was elim­i­nated from the ear­lier pro­cesses af­ter fail­ing to con­vince auc­tion­eers it had the fi­nan­cial where­withal to close a trans­ac­tion.

It re­mains the union’s pre­ferred bid­der, how­ever, af­ter pay­ing ho­mage to the worker’s “holy trin­ity” of jobs, pen­sion fund­ing and re­tiree health ben­e­fits.

Tony DePaulo, as­sis­tant to the union’s On­tario di­rec­tor, said Fri­day let­ting Es­sar back into the process re­mains the best out­come in their view and promised the union they will look at all op­tions to make that hap­pen.

An­other rea­son the union backs an Es­sar bid is it is the only bid­der to have said it plans to op­er­ate the steel mills. The union fears a purely fi­nan­cial bid­der, such as Bedrock, is only in­ter­ested in hold­ing the com­pa­nies long enough to slash costs and flip the mills to an­other buyer.

An­a­lysts say it’s still pos­si­ble to re­struc­ture both the for­mer Stelco and Al­goma, but the right con­di­tions won’t last for­ever.

McMaster Univer­sity busi­ness pro­fes­sor Marvin Ry­der goes a step fur­ther and warns liq­ui­da­tion of Stelco “is now the most likely out­come” for the com­pany.

“In Hamil­ton, the choice is be­com­ing quite clear,” he said. “The com­pany has been given un­til the end of De­cem­ber to be­come profitable. If it isn’t, and there’s no buyer in sight, then the judge will have no choice but to liq­ui­date.”

Vet­eran an­a­lyst Chuck Brad­ford said a merged Stelco-Al­goma has a chance of sur­viv­ing in the cur­rent en­vi­ron­ment where steel prices are ris­ing, but it would strug­gle if prices fall with­out the right man­agers — lead­ers who are in short sup­ply in the steel in­dus­try.

“It should be doable if the right peo­ple are there,” he said. “The bones are cer­tainly there so there should be a way of do­ing it.”

Univer­sity of Toronto steel ex­pert Peter War­rian said he ex­pects Es­sar will be al­lowed back into the bid­ding process while Bedrock In­dus­tries will move into the top po­si­tion for the com­pany.

U.S. Steel Canada’s pro­tec­tion ex­ten­sion re­quest is to be heard July 27, the day be­fore the cur­rent or­der ex­pires.

In a re­lated de­vel­op­ment, Coun. Sam Merulla will ask coun­cil to back a mo­tion sup­port­ing a United Steel­work­ers call for a public in­quiry into Canada’s fi­nan­cial re­struc­tur­ing laws and the way they have been used by U.S. Steel to mount “con­tin­ued at­tacks” on pen­sion­ers.

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