Four months to find a buyer for Stelco

Com­pany’s Amer­i­can owner wanted an ear­lier dead­line, but judge rules com­plex deal needs more time

The Hamilton Spectator - - COMMENT - STEVE ARNOLD The Hamil­ton Spec­ta­tor sarnold@thes­ 905-526-3496 | @arnol­datTheSpec

— 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

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