A new day for a new Stelco: Judge approves sale to Bedrock
Sale opens up a new future for beleaguered steel company, but it's not all worry-free
It's a big day in the Stelco saga, as an Ontario judge has approved the sale of Stelco to U.S. investment firm Bedrock Industries.
At a hearing in Toronto today Justice Herman Wilton-Siegel, who has overseen a two-and-a-half year bankruptcy protection process, said he hopes "we're turning a page and commencing a new and more promising chapter in the history of Stelco."
The approval of the deal to sell the beleaguered Hamilton-headquartered steel company is final, pending a 21-day period for final details to be ironed out. That process will fill in the fine points on a complex plan that involves difficult compromises for many, made in the interest of keeping the company going.
We always said we had a good shot at doing it, without outside interference.- Bill Ferguson, Local 8782
And, the new chapter for one of Steeltown's oldest and most established companies is not all worry-free: The deal comes with uncertainty especially for pensioners and the city.
And the new company enters a continental trade market suddenly full of unknowns and questions.
The judge has been overseeing U.S. Steel Canada's court-supervised restructuring under the Companies' Creditors Arrangement Act since the fall of 2014.
And now, after two-and-a-half years, and after shedding ties to U.S. Steel and reviving the old Stelco name, the company is poised to finally emerge.
Bedrock Industries plans to buy both the Hamilton and Nanticoke, Ont., operations. The mills belonged to Stelco and were sold to Pittsburgh-based U.S. Steel in 2007 after a previous bankruptcy.
Bill Ferguson, Local 8782 president (Nanticoke workers), called today a "milestone" and is hopeful for Stelco's future. <a href="https://t.co/5Ap9J0uWuc">pic.twitter.com/5Ap9J0uWuc</a>—@kellyrbennett
The day is a "milestone" said Bill Ferguson, head of the United Steel Workers Local 8782, which represents workers in Nanticoke.
"I think it's a compromise and every party in the compromise gave on some areas."
He said he has faith the steel the plants make is a good product and the company can move forward and succeed.
"We always said we had a good shot at doing it without outside interference."
The Bedrock deal has been in the works for several months.
Clouds on the horizon
The deal has been pitched as lifeline that allows the company to continue instead of being liquidated.
But this time around, the affected parties are a little more wary and seasoned, for a few reasons:
While U.S. Steel promised (yet failed) to shore up the massive pension shortfall over 10 years when it bought the company in 2007, this deal proposes selling off land to fund pensions and doesn't promise full reinstatement of retirement benefits for Hamilton workers.
Bill Aziz, Stelco chief restructuring officer, said land transfer deal (selling contaminated land to fund pensions) is 1st he's ever seen. <a href="https://t.co/6r8bk9qz57">pic.twitter.com/6r8bk9qz57</a>—@kellyrbennett
Despite hundreds of millions of dollars put into the pension funds over the last decade, the shortfall remains and still hovers around $1 billion. And the province won't force Bedrock to make up the pension fund's deficiency.
I don't think you'll see condos there.- Bill Aziz , chief restructuring officer
Meanwhile, that land that is to be sold needs remediation, and the deal provides $80 million to the province to put toward that cleanup. But just how long it will take and how much it will cost remains to be seen.
Bill Aziz, the chief restructuring officer, said the land deal was an innovative solution.
"With the proper redevelopment the property can be worth money," Aziz said.
"I don't think you'll see condos there, but you'll see industrial applications, and it's something that will be beneficial for Hamilton, for southwestern Ontario and for the retirees of the company."
Uncertain trade climate
Another cloud casting a shadow is the emergence of President Donald Trump's re-opening of the NAFTA trade deal and his emphasis on "buy American" – it's unclear what the impact will be on a Canadian steel company used to freely buying and selling to and from American counterparts. Will Canada and China be painted with a broad brush?
The deal offers some short-term assurances about pensions. But what Bedrock's ultimate intention is with the company remains to be seen, after it's free from the obligation to make up that larger pension fund shortfall.
The endorsement of unions representing workers in Hamilton and Nanticoke were among the final pieces in the deal's progress toward the judge's approval Friday.
Hamilton workers gave the deal a slim majority, with 64 per cent of voting members from Local 1005 in favour.
And Nanticoke workers voted with more than 86 per cent in favour.
Still to be worked out are the finer details of how pieces of the agreement like the land sales fund will work.
The football metaphor of being "on the five-yard line" was invoked frequently in Friday's hearing.
A lawyer for U.S. Steel, which is imposing a deadline of 5 p.m. June 30 for the deal with Bedrock to be settled, cheered the progress but cautioned "we're not at the goal line yet."
Ken Rosenberg, lawyer for United Steelworkers international as well as the Nanticoke locals 8782 and 8782b, said because of those outstanding issues, the unions were not supporting the plan but rather "not opposing" it for court purposes.
"Thank you for your patience over the last almost three years," he said to Wilton-Siegel. "We're almost there."
A lawyer for the salaried workers not represented by the unions said the deal was "better than liquidation."
"You can't always get what you want, but it's good enough," said the salaried group lawyer, James Harnum.
But Harnum said he didn't want to gloss over the compromises made. Those include a haircut on post-retirement benefits for Hamilton Local 1005 and his group, as well as a loss of pension security under a traditional employer "defined benefit" plan.
"There's still real people suffering real losses here," he said.