Four months to find a buyer for Stelco
Company’s American owner wanted an earlier deadline, but judge rules complex deal needs more time
— A judge has turned aside another effort by Stelco’s American owner to rip away the steelmaker’s creditor protection.
In a decision Tuesday, Justice Herman Wilton-Siegel ordered the protecting shield extended to Nov. 30 in the hope of giving a potential buyer of the company a chance to negotiate deals with workers, the provincial government and other stakeholders.
“The evidence before me doesn’t warrant imposing any harder deadlines,” he said. “This remains very much a day-by-day evaluation.”
U.S. Steel, of Pittsburgh, opposed the long extension and wanted the shield extended only to Aug. 12. The order was to have expired Thursday.
U.S. Steel Canada, the former Stelco, has been sheltering under creditor protection since September 2014 as it seeks to sell itself to a new owner in order to satisfy debts and make the investments needed to compete in a global industry plagued by production overcapacity and unfair competition.
Lawyer Paul Steep, acting for the company, said that effort is making slow progress toward a sale to a buyer willing to keep Stelco in business, but time is needed to hammer out the details.
“There are a number of bids, including bids for a going-concern transaction which has been the entire focus of this process,” he said. “The monitor says there is positive progress being made, but time is needed for the negotiations to reach an agreement.”
If those talks fail, he added, it’s always possible for the focus to shift to a sale of pieces of Stelco or liquidating the entire operation.
The Pittsburgh company, which bought Stelco in 2007, wanted a short deadline to force a quick sales decision. If a sale couldn’t be settled, it could then move to liquidate the company.
That would allow the American company to collect payment for its secured debts while leaving Stelco’s badly underfunded pension plans to be wound up, forcing pensioners to give up some of their retirement income.
Standing in the way of a sale agreement are requirements to get the support of the United Steelworkers and the provincial government. The union has said it will not agree to a sale that doesn’t include topping up the pension plans, ensuring jobs and restoring post-employment benefits such as prescription coverage and dental plans for retirees.
Those benefits are called other post-employment benefits, or OPEBs.
Lawyer Michael Barrack, acting for U.S. Steel, argued that after nearly two years in protection it is time to bring Stelco’s long struggle to closure.
“This process has gone on for a long time without clear deadlines,” he said. “Fixed timetables and the supervision of the court will assist this process.”
U.S. Steel made similar arguments against the previous protection renewal order.
Steep, however, said the deadlines requested by the parent company are just too tight.
“These are issues that cannot be dealt with in a week,” Steep told the court. “That sends a mixed, if not negative, signal to the market.”
In another decision rendered Wednesday, Wilton-Siegel agreed to delay a United Steelworkers motion calling for the immediate reinstatement of retiree prescription and other benefits. The judge also delayed a decision on a company request to pay special retention bonuses to key employees.
The union bitterly opposes raises or bonuses to salaried workers when retirees are being denied coverage for prescriptions and other health needs.
Those motions will be heard after meetings late this week or early next week to try to negotiate a settlement.
Wednesday’s hearing was attended by a busload of about 40 steelworkers who packed the courtroom’s tiny public gallery in support of their motion.
In an interview outside, they said the members wanted an outlet for their anger against a process they think is stacked in favour of the company and ignores their concerns.
“They feel they have been cheated of their benefits,” said Gary Howe, president of USW Local 1005. “We want the whole process investigated.”
With MPP Paul Miller, who also attended the hearing, the union has called for a federal public inquiry of Canada’s business restructuring regime. The Companies Creditors Arrangements Act, he said, is 80 years old and badly in need of an update.
“It’s a gold mine for lawyers because it just keeps going on and on, more delays and more extensions. It has to end because people’s lives are being impacted on a monthly basis. This has got to stop,” said Miller.
“We have to move people up in the pecking order.”
These are issues that cannot be dealt with in a week. That sends a mixed … signal to the market. JUSTICE HERMAN WILTON-SIEGEL