U.S. Steel Canada got the $185 million loan it needs to stay afloat Wednesday afternoon, but Hamilton union officials warned the conditions attached to the money threaten its employees and pensioners.
Superior Court Justice Herman Wilton-Siegel approved the Debtor-in-Possession, or DIP, loan from U.S. Steel Corp., the American parent company of U.S. Steel Canada, which has operations in Hamilton and Nanticoke, Ont. The approval came as part of his approval of the overall bankruptcy protection plan pitched by the company.
Lawyers involved in the agreement held intense negotiations in the week leading up to today's agreement. It appears despite those negotiations, U.S. Steel gave up little from its initial plan.
'We're thinking the worst, in terms of what they're up to.'- Local 1005 President Rolf Gerstenberger
Lawyer Paul Steep, who represented U.S. Steel, said the $185 million DIP loan will pay for pensions and benefits (about $5.8 million and $3.6 million per month, respectively) and will provide stability to the ailing company during the restructuring period, which runs until the end of 2015.
Steep told the judge the DIP, and several other motions U.S. Steel Canada sought under the Companies' Creditors Arrangement Act are "not just fair and reasonable, they're manifestly in the best interest of all before you."
Steep did say, however, that as the DIP lender, U.S. Steel Corp. retains the right to reduce or pull the funding if certain actions are taken against the company.
"We'll work with the parties so this never has to be triggered," Steep said.
Rolf Gerstenberger said the conditions to reduce the funding, which include things like work stoppages, amount to a "threat" from the company.
"There's all these things to make the process go their way," Gerstenberger told reporters outside the courthouse.
"We're thinking the worst, in terms of what they're up to."
Ontario, Hamilton agree to DIP plan
Steelworkers unions, the province of Ontario and the city of Hamilton had all filed objections against U.S. Steel's plan, but all agreed to the plan put before the court.
United Steelworkers' lawyer Ken Rosenberg said the union did not consent to the agreement, but would not oppose it, a statement echoed by Hamilton steelworkers Local 1005 lawyer Sharon White.
U.S. Steel at dusk (CBC)
Rosenberg said the union would work to restructure U.S. Steel, "but not solely on the backs of its workers and pensioners."
White said her union has "little confidence" that U.S. Steel Corp. won't terminate or reduce the DIP, and warned the American steel giant "should not be trusted with the power of a DIP lender."
Robert Chadwick, the insolvency lawyer representing the province, said it remains Ontario's position that U.S. Steel is obligated to pay its pensions outside of the DIP.
The province's concern that the conditions attached to the funding would restrict the Ministry of Environment's work, he said, were addressed during the negotiations.
Chadwick said the DIP provides stability and funding, but pointed out it's just interim funding, and the company and its stakeholders need to work together to put solutions in place for after it expires in 2015.
The City of Hamilton's lawyer, meanwhile, said an agreement had been reached about how the company would pay its taxes.
Hamilton Mayor Bob Bratina, who sat among steelworkers in the back row of the courtroom, said while that issue was dealt with, there are "too many questions still unanswered" by the process.
Steelworkers seek win in 'court of public opinion'
For its part, U.S. Steel Canada released a statement saying it will "continue to carry on business as usual while it develops and implements comprehensive restructuring solutions."
There was no bus of Hamilton steelworkers on Wednesday, but members of the Local 1005's executive as well as several retirees packed the three rows of seats.
One current steelworker on the executive said they were doing their best to stay current with the barrage of legal information, as it would fall on them to explain what happened to their colleagues at the steel plant.
Afterwards, some expressed relief there would be some stability in the upcoming year, even if that stability is controlled by the company.
One of the biggest concerns for retired Stelco employee Steve Kajganic was what happens to pension money once the DIP loan expires.
"That's a big question that I have no answer to," he said, adding he's facing an "uncertain future."
Retired steelworker Paul Lane said he wasn't expecting the court to favour the steelworkers.
"Any working person knows the only rights you have are the rights you fight for," Lane said.
"It's in the court of public opinion where we'll win."
Ottawa also weighed in on U.S. Steel's proposal on Wednesday, though it was not involved in the case.
"Our Government's thoughts are with the workers and their families during this restructuring process," said Jake Enwright, spokesman for Industry Minister James Moore.
"The Government of Canada will continue to monitor this situation closely."
A bankruptcy court judge has approved a loan arrangement that would see U.S Steel Canada's parent company in the United States provide funds to keep it operating.
The $185 million loan arrangement, called Debtor-in-Possession, or DIP, would mean the American parent company is first in line to get repaid.
Superior Court Justice Herman Wilton-Siegel approved the loan deal Wednesday afternoon as part of his approval of the overall bankruptcy protection plan pitched by the company.
There had been intense negotiations over recent days between U.S. Steel and stakeholders critical of the plan, including multiple steelworkers' unions, the province of Ontario and the City of Hamilton. It appears despite those negotiations, U.S. Steel gave up little from its initial plan. The approval means pensions of former workers are safe for the duration of the bankruptcy proceedings.
Presenting the deal to the court, a lawyer for U.S. Steel said the DIP proposal was "not just fair and reasonable, they're manifestly in the best interest of all before you."
The lawyer for Steelworkers Local 1005, which represents workers in Hamilton, says her union has "little confidence" in U.S. Steel Corp. as the DIP lender, but will not oppose it.
Lawyers for the city of Hamilton also advised they did not oppose the DIP, since the issue of municipal taxes had been resolved in the discussions over the DIP repayment order.
If you want to get in touch with John Rieti you can reach him by email at john.rieti@cbc.ca or 905-536-8795
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