U.S. Steel has won a major victory in the ongoing bankruptcy protection proceedings of its former subsidiary, U.S. Steel Canada.
Ontario Superior Court Justice Herman Wilton-Siegel decided in favour of the Pittsburgh-based corporation on claims that the more than $2.2 billion it invested in the Canadian operations in Hamilton and Nanticoke are debts to be repaid, not cash infusions in the ongoing operation of the business.
That finding puts U.S. Steel in a position of control over the disbursement of the rest of the U.S. Steel Canada assets. That means little would likely be left to top up the company's underfunded pension funds, and could mean a drop in what 20,000 Stelco pensioners are expecting in their pension cheques.
For that reason the claims were objected by the province, unionized steelworkers and salaried active and retired employees of the former Stelco. The claims were the subject of eight days of hearings last month.
- U.S. Steel argues it kept former Stelco afloat, only to be maligned
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Now all that doesn't matter'
The claim has long been a part of the bankruptcy protection process initiated in September of 2014.
But a hearing into the claim was postponed as the process focused on other issues, like the Canadian operations' plans to get back on its feet and put its operations up for sale.
Wilton-Siegel approved a transition plan in October that saw U.S. Steel Canada become a stand-alone company, at which time the Canadian company's executives sought and received approval to suspend paying retiree health benefits.
A new process to seek a buyer or investors was launched at the beginning of February
The province has stepped in with a temporary fund to help retirees pay for prescriptions, but that taste of unexpected retirement cutbacks has thousands of people in Hamilton and Lake Erie facing an uncertain future.
Thousands of them and their supporters rallied downtown Hamilton late last month.
"A lot of us got sick, got injured. Some of them died on the job to produce and make a good living wage for themselves and their families and now that all doesn't matter," said Doug Parry, a retired steelworker.
"This is also going to have a ripple effect in Hamilton," Parry said. "Because the more we have to depend on agencies in the city, it's going to cost the city more money too."
'Years and years and years to resolve'
The judge said in his decision that if he were to conclude that the $2.2 billion was "equity" and not "debt," he'd have to be satisfied either that the parent company did not believe that its Canadian subsidiary would be able to pay back the money with interest, or that there was no reasonable basis for the parent company to expect the Canadian companies to generate enough cash flow to pay back the loans with interest.
were documented as such and were distinguished, both in terms of documentation and accounting, from equity injections," the judge wrote.
After the final day in court in late January, Local 1005 president Gary Howe forecasted a drawn-out legal battle no matter which way the judge ruled.
"Even if either side loses, there's still grounds for two levels of appeal," he said. "So it could take absolutely years and years and years to resolve."
Read the judge's decision, issued Feb. 29:
Justice Herman Wilton-Siegel decision on USS debt claim
Justice Herman Wilton-Siegel decision on USS debt claim (PDF 6.8KB)
Justice Herman Wilton-Siegel decision on USS debt claim (Text 6.8KB)