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The divorce between United States Steel Corp. and U.S. Steel Canada Inc. will likely lead to new bids for the Canadian unit, sources familiar with the restructuring say.
U.S. Steel Canada has been effectively cut loose from its parent company under a transition agreement announced last week that includes a promise that the Pittsburgh-based U.S. Steel will not be a bidder if there is a second effort to sell the Canadian unit.
Potential bidders were put off during the first sales effort by a process they believed was skewed in favour of U.S. Steel, sources said. “There are people out there who want to rebid,” said one source involved in discussions about the future of U.S. Steel Canada. “Now, we have a sensible sales and restructuring process.”
The promise that U.S. Steel will not bid for the company means other purchasers don’t have to worry about a potential claim of more than $2-billion that U.S. Steel applied against the Canadian company and had been planning to use as credit in its own bid.
The transition agreement approved by the Ontario Superior Court on Friday makes U.S. Steel Canada an independent company still operating under the protection of the Companies’ Creditors Arrangement Act. It effectively creates a clean slate for new bidders or companies whose earlier bids were rejected because they didn’t meet conditions set up by U.S. Steel.
The agreement provides new debtor-in-possession financing of $75-million, the payment by U.S. Steel of remaining 2015 pension contributions and the provision of two more years of services by the parent company.
But the court also approved the suspension of health benefits to about 20,000 retirees and dependents and a halt in payments of municipal taxes to Hamilton and Haldimand County, Ont., where the only U.S. Steel Canada mill that is actually making steel is located.
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