U.S. Steel Canada says Essar Global restructuring proposal won't be considered
Essar replies and says its ready to put money down to back up its bid.
U.S. Steel Canada is rejecting advances from the Essar Global fund, saying it isn't qualified to purchase the company formerly known as Stelco, which has been seeking a buyer under a lengthy court-supervised process.
The Hamilton-based company says Essar Global was previously eliminated as a contender in the court-supervised sales process — in part because it failed to provide sufficient evidence that it has the financial ability to buy and operate U.S. Steel Canada.
The Ontario Steel Investments group — a vehicle set up by Essar Global — didn't announce Tuesday what it would pay for the business, which has its operations in southern Ontario at Hamilton and Nanticoke.
However, Ontario Steel said it's offering to assume $954 million of employer liabilities under U.S. Steel Canada's pension plans and a commitment to contribute $25 million per year towards so-called post-retirement benefits for both active and retired employees.
The same group has also offered to buy Essar Steel Algoma Inc. in Sault Ste. Marie, in northern Ontario, which is also under court protection.
'Substantially similar'
U.S. Steel Canada said Tuesday that the Essar consortium's terms are "substantially similar" to what was previously rejected by the company and the province.
The Ontario government also has an important role in determining what happens to U.S. Steel Canada because of its huge pension liabilities.
The Essar offshoot commented on the company's rejection on Wednesday.
"Ontario Steelworks is ready and able to demonstrate our financial wherewithal by immediately making a substantial deposit backing our bid, which we have communicated to [U.S. Steel Canada]," the company said in a statement.
"We believe our offer has the support of the employees of U.S. Steel Canada as well as the local communities of Hamilton and Nanticoke," the statement continued.
"We are eager to meet with the province of Ontario to discuss the merits of our offer as well as the investments we plan to undertake if we are successful in acquiring U.S. Steel Canada. Despite U.S. Steel Canada's rejection, we remain committed to the process and hope the company will allow us to address the concerns raised in their released statement."
Union reaction
Both Essar offers for Algoma Steel and U.S. Steel Canada would also require an agreement with the United Steelworkers, which has current and retired members at both Ontario steel companies.
Union headquarters hasn't commented publicly on Essar Global's proposal for U.S. Steel Canada, but one of its locals is working on a framework agreement at Algoma Steel.
In Hamilton, United Steelworkers Local 1005 president Gary Howe was angry about the rejection.
"I am outraged and am sure that our members will be as well," he said.
In Howe's estimation the company would be well-positioned to assume control of both the former Stelco and Algoma, and they pledged to cover pension liability and a major chunk of the post-retirement benefits that were cut off last year.
"And [U.S. Steel Canada] will not consider the bid because the province will not support it," Howe said Wednesday. "Thankfully we are asking for a public Inquiry because this whole USSC [Companies' Creditors Arrangement Act] really stinks."
U.S. Steel Canada has been operating under protection from the Companies' Creditors Arrangement Act since September 2014. Last Friday was one of the interim deadlines within a court-supervised sales process.
The company said Tuesday it's not considering any further proposals from Essar and "will avoid any distraction that could be detrimental to the company, its employees and pensioners, at a time when the restructuring process is progressing, and negotiations with the current bidders continue."