Stelco emerges from bankruptcy protection after nearly 3 years
Sale to U.S.-based Bedrock Industries closes after company and union make trade-offs on pensions and benefits
After nearly three years, Stelco emerged from court-supervised bankruptcy protection on Friday as a sale to U.S.-based Bedrock Industries became final.
In a press release, Bedrock chairman Alan Kestenbaum tied the "rebirth of Stelco" to the celebrations happening this weekend for Canada's 150th.
"We are well aware of Stelco's storied history and the special position it holds in the hearts of those in the communities of Hamilton and Nanticoke in which it operates, and across Canada," Kestenbaum said.
The deal was closed after the union representing Hamilton workers and retirees agreed to concessions, losing some of the pension security they counted on in exchange for some money put toward retiree benefits.
Local 1005 president Gary Howe said the local would give the new company a chance to prove itself, but that many members remember painfully the promises made — and broken — when U.S. Steel bought the company a decade ago.
Earlier this week, Kestenbaum's partner David Cheney made the company's first public remarks locally since Bedrock emerged as a would-be buyer more than a year ago.
Cheney, Bedrock managing partner, told Hamilton and Burlington business leaders Tuesday that the company wants to be profitable for "all of our stakeholders," which he listed as the workers, the community, the environment and the company's shareholders.
"One of our goals is to make Stelco the employer of choice again in Hamilton," Cheney said.
"This is an iconic brand with a rich history in Hamilton and the province of Ontario and we're going to restore that."
In bankruptcy court since 2014
Earlier this month, an Ontario judge approved the sale of Stelco to Bedrock Industries. The previous owner, U.S. Steel, imposed a deadline of June 30 to get the fine print on the deal done. The release confirmed that had been accomplished.
Cheney said the company is a "privately funded, industrial investor" with $500 million already committed and access to $2 billion for other deals.
The judge has been overseeing U.S. Steel Canada's court-supervised restructuring under the Companies' Creditors Arrangement Act since the fall of 2014.
The mills in Hamilton and Nanticoke belonged to Stelco and were sold to Pittsburgh-based U.S. Steel in 2007 after a previous bankruptcy. The company changed its name back from U.S. Steel Canada in December.
What's in the deal
Also in December, the plan was revealed from Bedrock on how it would acquire Stelco. The province, which was quite involved in the negotiations, highlighted some key elements in the plan:
- Operations continue at both the Hamilton and Lake Erie mills
- Retirees keep their pensions without reductions or interruption
- Retirees continue receiving benefits
- Environmental liability on the land is taken care of
Establishing a contract with the unions was not easy. Nanticoke has 800 active members and about 1,000 retirees. Hamilton has 540 active members and 9,000 retirees.
Under the initial proposal, Local 1005 was supposed to see a haircut on retiree benefits, while Local 8782 in Nanticoke would be fully funded.
But in negotiation, Local 1005 was able to secure a pledge of $20 million a year for at least 10 years toward the benefits, which chapter president Gary Howe said was a "lot more" than the original plan.
"We think that with $20 million we're going to be able to get people similar services," he said. "It's not exactly the same thing; it is less than what they had before, but we still intend to provide dental, vision and drug coverage for everyone."
Howe said it would take a few months to get the new health benefit fund set up, but the chapter has details about coverage in the interim on its website.
Howe said the union made a "pretty bad concession" in signing a deal of "taking pensions off the balance sheet," which allows Bedrock to contribute to the pension fund without shouldering the obligation to make up the entire pension shortfall.
'They'll have to prove that they are different'
Howe said at Local 1005, the employees and retirees are "pretty skeptical."
"Bedrock is saying that things are going to be a lot different," he said. "They know that people are apprehensive. They'll have to prove that they are different. We'll have to wait and see how things go."
But he said so far, all of the messages he's received from Bedrock have been encouraging.
"They have said all the right things," he said. "I give them that credit."
Next, the union will look at grievances and human rights complaints, which have been suspended while the company was in restructuring.
Cheney addressed the bumpy road of deal-making in his remarks Tuesday.
"Comments have been made that this (Bedrock's bid to buy) may not be the best solution, but it's probably the best solution that gets everybody something of what they want," Cheney said. "A great outcome is that everyone is kind of unhappy."