Advisors recommend paying U.S. Steel Canada bonuses, but not benefits
Workers say positive cashflow means benefits should be reinstated
U.S. Steel Canada is offering $2.7 million to a fund set up to help retired steelworkers get access to benefits. But, in exchange, they want workers to back off their opposition to pay bonuses to "key employees" and drop their motion to fully reinstate the benefits.
That's one of the proposals, back and forth, on whether U.S. Steel Canada will be allowed to earmark bonuses and whether the company will reinstate retirement medical benefits for more than 20,000 employees and their families that were temporarily cut off last October.
The items were scheduled to be heard in court last month, but Superior Court Judge Herman Wilton-Siegel gave the parties a few weeks to figure out a solution outside of court.
Details of those proposals came out in the past few days.
- Steelworkers' benefits decision postponed in U.S. Steel Canada bankruptcy hearing
- U.S. Steel Canada retirees to ask judge to reinstate their benefits
Retired steelworkers and salaried employees offered Friday to stop opposing the company's bonuses plan as long as U.S. Steel Canada would reinstate full benefits beginning Tuesday until Dec. 30, 2016.
U.S. Steel Canada countered with an offer to contribute $2.7 million to the transition fund that has been set up to help retirees access prescriptions and other crucial benefits, if the steelworkers would approve the bonuses plan and drop their motion to fully reinstate the benefits.
The court-appointed monitor of the restructuring efforts said in a report on Monday that the benefits claims should be negotiated on a long-term basis with whoever buys the company.
Bonuses vs. benefits
U.S. Steel Canada's chief restructuring officer, while it's in bankruptcy protection, said in court documents filed this week that the company has enough money to set aside the bonuses, but not the benefits.
The bonuses fund is capped at $1.57 million. The benefits could cost the company more than $3 million a month.
U.S. Steel Canada is at an important juncture in its sale process; would-be buyers were given Aug. 5 as a target for getting their bids in.
U.S. Steel Canada was allowed to stop its payment of the benefits, known as "other post-employment benefits" or "OPEBs", last October after the judge ruled the Canadian company could separate from its Pittsburgh-based parent and suspend benefits as a "cash conservation measure."
Many of the retirees had spent their entire adult lives working at Stelco, and didn't know how to access health benefits on their own, according to a motion filed by the United Steelworkers union and retired salaried workers.
The province set aside $3 million initially, and added another $2.5 million recently, to help with some urgent cases, prescriptions and health needs.
The steelworkers say people are falling through the gaps in the coverage from that temporary fund. The monitor said that the offer of $2.7 million from U.S. Steel Canada could be applied toward filling those gaps.
Outside court, <a href="https://twitter.com/USWHamilton">@USWHamilton</a> prez Gary Howe says workers spent years in dangerous mills, counting on health help. <a href="https://t.co/nJg81tB1Dn">pic.twitter.com/nJg81tB1Dn</a>—@kellyrbennett
'This is not a trend'
Workers have argued that the company has increased cash on hand, and better-than-forecasted financials.
The company posted income that was higher than its expenses in June, for the first time in 2016.
But William Aziz, the chief restructuring officer, said every other month since last October, U.S. Steel Canada has lost money in its operations. And some of the factors that led to the positive income include the unpredictable fluctuations of steel prices and the Canadian dollar against the U.S. dollar.
Aziz warned that the recent good news of positive income was not something to count on going forward.
"This is not a trend and is certainly not enough to counter the losses from operations prior to that time," he wrote in an affidavit dated Aug. 11.
He said reinstating the benefits could jeopardize the company's chances of successfully restructuring and emerging from the sale process as a going concern.
Arguing for the unionized workers and retirees, as well as salaried pensioners, advisor Paul Bishop said Aziz did not "show mathematically that USSC would not have sufficient liquidity to meet its business needs if it funded [the benefits]."
What's behind the bonuses
U.S. Steel Canada is asking for court permission to grant retention bonuses to 34 "key employees" whom it says have a "deep knowledge" of the business and would be integral to keeping the company going in the event of a successful sale.
The bonuses are earmarked but not given out until the first of a number of triggers takes place:
- The employee is let go without cause
- The company is sold
- The company is substantially liquidated
- The employee is no longer integral to facilitate a liquidation
- June 30, 2017
A quarter of the bonus would be held back until three months after a sale, to incentivize the key employees to stay to help with the transition.
The company had a similar fund that was just triggered on June 30, 2016. The idea behind the bonuses is to incentivize key employees to stick around while the tumultuous sale and creditors-protection processes continue.
U.S. Steel Canada entered the Companies' Creditors Arrangement Act in Sept. 2014. A previous sales process ended without a successful buyer.