What we know and what we don't about the possible U.S. Steel Canada deal
What does Wednesday's agreement between the province and Bedrock Industries mean?
After more than two years in court-supervised bankruptcy protection, private equity investment firm called Bedrock Industries Group —a fund that buys distressed companies and restructures them —moved into prime position to buy U.S. Steel Canada.
A memordandum of understanding with the province was announced Wednesday, but there are many things that would still have to be negotiated first- and many other players in those negotiations.
Any decision affects more than 20,000 pensioners and their families, but also their neighbours and fellow residents whose tax dollars are implicated in whatever happens to the steel company.
The province of Ontario is owed money by U.S. Steel Canada and has concerns about pensions, benefits for retirees, ongoing jobs and decades-old environmental liability. That makes it a big player in the process for how the company emerges.
But Wednesday, the province signed off on a framework with Bedrock that lays out (mostly confidential) terms for how such a restructuring might be permitted. Here's some of the reaction to the province's announcement.
Their support adds likelihood to this being the way that U.S. Steel Canada moves forward out of the Companies' Creditors Arrangement Act
But there are a lot of other stakeholders who have to add their blessing (and negotiate amendments to the agreement in their favour) before this agreement becomes the way forward.
What happens next?
With the province on its side, Bedrock now has some big conversations ahead, with:
- U.S. Steel, the American former parent that bought Stelco in 2007, as the largest and most powerful creditor
- The unions in both Hamilton and Nanticoke, Ont. about new collective agreements.
- The courts overseeing the CCAA process.
"It will be conditional upon everyone's approval, including the union, including employees, including the pensioners, including the other stakeholders," said Minister of Finance Charles Sousa in Queen's Park on Thursday, in response to questions from Hamilton East-Stoney Creek MPP Paul Miller.
"It is a very complex situation, and this is only a first step in trying to facilitate our way through it," Sousa said.
What don't we know?
We don't know how long this will all take.
We don't know if the two plants would be treated the same on an ongoing basis, though a press release from United Steelworkers said both Hamilton and Nanticoke plants will continue to operate.
We don't know if the two local unions – the Nanticoke-based or the Hamilton-based Local 1005 – will negotiate the same deals for their pensions and benefits, or whether their members will vote to accept the terms.
In Question Period on Wednesday, Miller asked Sousa to commit to fully funding the pension plans for both plants and ensure both plants keep operating at current levels.
We don't know if U.S. Steel, the American parent company in Pittsburgh, will try to veto this entire deal in favour of fighting for the money it claims it is owed through another outcome, like liquidation.
We don't know how Bedrock and U.S. Steel would work out who covers what in terms of environmental legacy liability, which could carry huge price tags.