TORONTO (Reuters) – U.S. Steel Corp’s move to seek creditor protection for its Canadian operations throws into question the fate of the more than a century old steel operations in Hamilton, Ontario.
U.S. Steel acquired the Canadian operations – including the Hamilton assets and the newer Lake Erie facilities in Nanticoke, Ontario – through its acquisition of Stelco Inc in 2007. The Canadian operation was soon bleeding red ink, however, as demand for steel declined following the financial crisis.
Much of the Canadian operation’s value is seen residing in Lake Erie, with years of job cutbacks, environmental liabilities and the weight of a massive retiree base weighing on the worth of the Hamilton assets.
People familiar with the situation told Reuters that U.S. Steel had sought to restructure its Canadian operation this summer, before it sought creditor protection in Canada earlier this week. One plan included the parent company acquiring the Lake Erie facilities but divesting itself the Hamilton assets.
After those plans failed to pan out, some industry watchers think U.S. Steel’s move to seek creditor protection may just be the longer road toward the same end game.
“The creditor protection filing by U.S. Steel seems almost like a bit of leverage play,” said a Canadian lawyer, who asked not to be named as it was against his firm’s policy to comment publicly on such matters.
U.S. Steel spokesman Trevor Harris said on Friday the court-supervised process will facilitate a dialogue with stakeholders and could lead to asset sales.
“The restructuring may include a consensual restructuring involving the relevant stakeholders and, potentially, a sales process to solicit interest in purchasing all or a part of the business,” he said.
CLEAN UP COSTS, PENSIONS
Lawyers say any potential buyers of the Canadian assets will do so only if they are able to strike a deal with the union and secure some favorable assurances from the government around both clean-up waivers and pension funding rules.
The significant environmental clean-up costs expected at Hamilton are the result of operations that date back over a century. The vast majority of the retiree base also comes from the storied operations in that city.
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