U.S. Steel making money while restructuring
John Rieti | CBC News | Posted: January 20, 2015 6:57 PM | Last Updated: January 21, 2015
Company seeks extension of creditor protection on Wednesday
U.S. Steel is making money, even as it gets set to ask a bankruptcy judge to grant an extension of creditor protection.
A court monitor’s report on the company’s cash flow from Nov. 22 to Jan. 2 shows the company had a net positive cash flow of $85.4 million.
The company’s cash position now stands at $188 million, with expectations that while the growth won’t continue until May 15 — the date the company wants creditor protection extended until — it won’t need to rely on the $185 million debtor-in-possession (DIP) loan from it’s American parent, U.S. Steel Corp.
U.S. Steel sought bankruptcy protection under the Companies’ Creditors Arrangement Act last September, citing years of loses totalling some $2.4 billion since 2009. The company’s goal is to sell its Canadian operations by the end of October, 2015.
Alex Morrison, the court monitor, highlights the company’s complex positive and negative business dealings behind the profitable period in his latest monitor’s report. As a disclaimer, Aziz notes the cash flow figures and projections noted in his report are based on unaudited financial information produced by U.S. Steel.
Rolf Gerstenberger, President of United Steelworkers Local 1005, said in the big picture the profit means little to steelworkers.
Gerstenberger said it’s his understanding the Lake Erie operation made some money while Hamilton didn’t, but that the company did do better than it had expected.
“It’s better than them being into the DIP,” Gerstenberger said, adding he wasn’t sure what would happen should the company be able to avoid using the $185 million loan during the restructuring process.
Steelworkers were upset the judge OK’d the DIP loan last fall, as it meant U.S. Steel Corp. became the largest creditors and would get its money out first if the U.S. Steel Canada became insolvent.
U.S. Steel expected to get extension
Gerstenberger said union executives and some steelworkers are planning to attend U.S. Steel’s court date in Toronto on Wednesday afternoon.
Chief Restructuring Officer Bill Aziz has recommended Superior Court Justice Herman Wilton-Siegel grant the company’s request to extend its protection from creditors — referred to in the documents as the "stay period."
The North American steel market is expected to remain in a period of uncertainty in the coming months, the court monitor's report says.
"The Applicant advised that the dramatic fall in oil prices over the last several months is having a significant impact on demand for steel products sold into the oil and gas sector," Morrison writes.
U.S. Steel Corp. plans to lay off over 600 employees after idling a plant in Lorain, Ohio that specializes in tubular steel, a move it blames squarely on weak demand from the oil industry.
The Ontario plants haven’t been hit as badly, as nearly a quarter of their output goes to the auto industry, where demand has been steady, writes Morrison.
Overall, steel prices have been in decline since last fall.