Steam billows from a stack at the U.S. Steel Canada plant in Hamilton in this file photo taken March 4, 2009.MIKE CASSESE/Reuters
United States Steel Corp. has lost out on a bid to bring down the curtain on the restructuring of U.S. Steel Canada Inc., its former Canadian unit, which it cut loose last year after placing it into creditor protection in 2014.
The Ontario Superior Court rejected U.S. Steel's bid to halt an extension of U.S. Steel Canada's (USSC) protection under the Companies' Creditors Arrangement Act and the Pittsburgh-based company's alternative proposal that any extension be limited to May 20. The court ruled in favour of U.S. Steel Canada's request for an extension until July 28.
U.S. Steel pointed to the "significant and ongoing value destruction that is currently taking place at USSC, to the detriment of USSC's secured and unsecured creditors," as a reason for wrapping up the restructuring as soon as possible.
The company's former Canadian unit is in the midst of seeking a buyer or investor as part of a court-approved sales process. An earlier attempt to sell the business failed last year, leading to U.S. Steel's decision to walk away from the unit it established when it purchased Stelco Inc. in 2007.
U.S. Steel has a claim of more than $1-billion against its former Canadian unit – although that claim is being challenged by unions representing workers at U.S. Steel Canada and a group of salaried employees and retirees.
The value of that claim is being eroded as the sales process drags on, U.S. Steel said in its court filing, which also revealed that it made a bid to repurchase the Canadian unit during the first attempt to sell the company.
"USS is very concerned about USSC's continuing losses and the impact of these losses on USSC's liquidation value," U.S. Steel said in a court filing.
It noted that U.S. Steel Canada posted losses on an earnings before interest, taxes, depreciation and amortization (EBITDA) basis of $23.6-million in January and February and is projected to lose another $20-million in the March through May period.
"The main alternatives for USSC are, in essence, selling the business as a going concern or selling the assets through liquidation," Stephen Hannan, manufacturing director of the restructuring group at consulting firm Evercore Group LLC, which is advising U.S. Steel, said in a court filing.
There are several bidders for U.S. Steel Canada, whose offers court-appointed monitor Ernst & Young is assessing.
The bidders include ERP Compliant Fuels LLP, a company set up by Virginia environmental activist and health-care entrepreneur Tom Clarke, who is also bidding to buy the Wabush Mine in Labrador.
New York-based restructuring funds KPS Capital Partners LP and Bedrock Industries are also bidding, sources familiar with the U.S. Steel Canada restructuring have said.
The court reserved judgment Friday on a request by the active and salaried retirees and the United Steelworkers union, that their lawyers be allowed to see the terms of the so-called secret deal that ended the federal government's prosecution of U.S. Steel under the Investment Canada Act.
U.S. Steel made promises on employment and steel production in Canada when it bought Stelco in 2007 that it later broke during the financial crisis. Ottawa took it to court seeking penalties for breaking those promises, but later settled agreeing to new terms that were kept secret.
The stakeholders argued that U.S. Steel, U.S. Steel Canada, the monitor and the judge have seen the terms, so their lawyers need to be aware of them also so that the restructuring is fair.