U.S. Steel will lend U.S. Steel Canada $185 million plus millions in interest, fees and expenses while it undergoes a bankruptcy protection process, according to new court documents — but the company wants to make sure it is the first in line to be paid back.
According to documents, U.S. Steel will start seeking a buyer for the Hamilton steelworks as a "first priority."
The company says preparing the Hamilton site for sale is an "important and sensible" step. The Hamilton site includes finishing mills, coke batteries and iron- and steel-making operations that have been shut since late 2010.
Sale of the Hamilton works could begin in the next two months, while the Erie works could be put on the block in March 2015. The goal is to sell both by Oct. 31, 2015.
In sworn documents from superior court filed this week, U.S. Steel Canada president and general manager Michael McQuade said U.S. Steel will provide the funds so that the Hamilton and Lake Erie Works facilities can keep operating, but the condition is they'll be the first to be paid back. The company is using a type of loan used during these kind of proceedings called DIP- Debtor in Possession to ensure it gets its money before any other creditors.
That doesn't surprise local 1005 president Rolf Gerstenberger, who told CBC Hamilton he expected businesses that are owed money by U.S. Steel and pensioners will be scrambling for funds at the end of the process.
"All of the unsecured creditors will fight over what's left," he said. "But we're not investors or stock brokers. We've been there for 30 to 40 years making steel, doing what we're supposed to do."
"We don't want to be eating cat food when we retire."
The liabilities to four main pension plans affected add up to $838.7 million.
Under this process, people who picked up U.S. Steel stock for "pennies on the dollar" over the years stand to be paid out first before people who actually worked at the company, Gerstenberger says.
U.S. Steel spokesperson Trevor Harris could not immediately be reached for comment on the documents or the process.
Last week, U.S. Steel filed for bankruptcy protection with the Superior Court of Ontario. The process allows a company to restructure under the court's protection. If the court cannot approve a restructuring proposal, U.S. Steel would enter bankruptcy liquidation, although there is no hard time limit on how long CCAA protection could last.
On top of the $185 million, U.S. Steel would also be entitled to a $3.7 million "commitment fee" and a $5.5 million "exit fee" on top of the interest and principal on the loan.
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