Steam billows from a stack at the U.S. Steel Canada plant in Hamilton in this file photo taken March 4, 2009. United States Steel Corp. says a liquidation of the Canadian unit should be considered.Mike Cassese/Reuters
United States Steel Corp., which cut its ties with its Canadian unit last fall, says a liquidation of the business should be considered.
The Canadian company, now independent, but operating in creditor protection under the umbrella of the Companies' Creditors Arrangement Act as U.S. Steel Canada Inc. (USSC), is seeking court approval of a sales process.
An earlier sales process, done while U.S. Steel was still the parent of U.S. Steel Canada, failed amid a slumping steel market and battles between the Pittsburgh-based steel giant and such stakeholders as the United Steelworkers union, the Ontario government and a group of salaried employees and retirees.
The failed process means that all alternatives for obtaining value from the assets of U.S. Steel Canada should be considered, its former parent company said in a court filing.
"The main alternatives for USSC are, in essence, selling the business as a going concern or selling the assets through liquidation," U.S. Steel said. "Accordingly, any future sales process should explore opportunities relating to both of these possibilities and USSC should solicit interest from potential bidders who are interested in continuing to operate the business as a going concern as well as potential bidders who are interested in acquiring the company's assets for other purposes."
Liquidation – if no buyer is found to continue steel making – would mean the disappearance of a company that for decades as Steel Company of Canada and later Stelco Inc. was one of the blue-chip members of Corporate Canada.
Such a move would likely eliminate about 1,000 jobs at the steel maker's Lake Erie works in Nanticoke, Ont., and about 600 at finishing mills in Hamilton, where steel making ended in 2009.
U.S. Steel, which purchased what was then Stelco in 2007, urged the court to ensure that the new sales process be completed quickly because the Canadian unit has been financing operating losses and costs by liquidating inventory and other assets.
"Failure to act quickly will not only decrease USSC's value to potential bidders as time goes in, but will also likely diminish creditor recoveries if USSC is ultimately liquidated," U.S. Steel said.
U.S. Steel is a creditor by virtue of loans provided and investments made in U.S. Steel Canada before it went into CCAA protection in 2014, but the amount of its claim is in dispute.
A new financing agreement approved by the Ontario Superior Court in October required U.S. Steel Canada to gain court approval of a new sales process by May 31 and receive binding offers by Oct. 31.
U.S. Steel Canada is seeking court approval of a two-phase sales and investment process that would require potential bidders to submit non-binding letters of interest by Feb. 29. The timing of formal bids to be made under phase two will be provided after Feb. 29, U.S. Steel Canada said in a court filing seeking approval of the sales process.
The request asks the court to allow consultations between bidders and stakeholders.
Bidders may want to consult with stakeholders, U.S. Steel Canada said.
The Ontario government is a key stakeholder for potential bidders because it could end up having to backstop a pension deficit of more than $800-million and be on the hook for an unknown amount of environmental remediation in Hamilton.