Province can file claims against U.S. Steel Canada during restructuring

Lawyers representing the provincial government took centre stage at U.S. Steel Canadas restructuring hearingon Thursday, as the court worked toward figuring out who should gets paid first if the company is sold or goes bankrupt.

The provincewon the right tofile future claims against U.S. Steel Canada during its restructuring, while also successfully arguing thecourt will be allowed to examine the American parent's claim when it comes time to decide who what piece of the proceeds or assets.

U.S. Steel Canada has been in bankruptcy protection under the Companies Creditors Arrangement Act (CCAA) sinceSept. 16.

SuperiorCourt Justice HermanWilton-Siegel, who is presiding over the CCAA proceedings in Toronto, has already approved a $185 million debtor-in-possession loan from the companys American parent, U.S. Steel Corp., that has allowed the company to continue operating its Hamilton and Nanticoke, Ont. plants until the end of 2015.

The judges next move will be to pass a motion outlining the claims procedure order, which feature several revisions put forward by lawyers representing the province.

Significant issue

In court, lawyerRobert Chadwick, of Goodmans LLP, told the judge the fate of U.S. Steel Canada is a significant issue for many Ontarians from workers and pensioners to Hamilton residents whose environment is affected by the steel plant.

Chadwick, in his revisions, sought the ability to file claims against U.S. Steel Canada after a claims bar date, which the company had hoped to impose. That wouldallow the province a chance to claim a $150 million loan it made to U.S. Steel Canada when it acquired Stelco Inc., money it spends shoring up pensions, or to go after the company for environmental costs that may arise later.

The province also asked the judge to bring any claim above $25 million to be brought before the court before its acceptance, so: all stakeholders can have visibility and the right to be heard.

The provinces revisions were supported by lawyers representing steelworkers unions.

JusticeWilton-Siegel, after suggesting several wording changes to Chadwick and accepting others from U.S. Steel Canadas legal team, said he would endorse the motion byThursdayafternoon orFridaymorning. Documents pertaining to the case can be found here.

U.S. Steels lawyer, Paul Steep, said U.S. Steel Canada sought the claims bar date to provide a degree of certainty to those the company owes.

Its in every stakeholders interest to have as much certainty as possible around the claims, he told the judge.

Court oversight

According to Local 1005 President Rolf Gerstenberger, the province was successful in gaining court oversight of U.S. Steel Corp.s claim. Gerstenberger said previously, the court monitor from Ernst&Young Inc., would have determined the claim, but now, the court will get to examine that number.

That seemed to be a big sticking point with the province, Gerstenberger said.

U.S. Steel says theyre owed over $1.5 billion, I guess now theyre talking $2 billion, (the province) doesnt want the monitor to take that as a given, he said, adding the province would like more oversight of the process to ensure the American company isnt trying to pull a quick one.

Chadwick declined to comment following the hearing, saying he was not authorized by the province to speak about the case.

As for the provinces ability to make claims, Gerstenberger said todays effort was a preemptive move.

Theyre trying to prevent some problem later, said Gerstenberger.

Other lawyers involved in the case suggested the careful language presented in the court, and discussed at length behind closed doors, is crucial to making sure no side holds an advantage in the restructuring.

Even a small bits of wording can snowball to become big problems later in the proceedings, the lawyers said.

Hundreds of companies on creditor list

A court document listing U.S. Steels creditors shows hundreds of companies who are owed between $1,000 and $2.6 million, ranging from large corporations to small businesses from across the Hamilton area.

U.S. Steel Corp., however, remains the largest creditor by far. The court didnt hear in exact figure, but its claim is believed to be well over $1 billion.

The Pittsburgh-based company will likely be first on the list to be paid back if U.S. Steel Canada is sold or goes bankrupt due to the debtor-in-possession loan.

No definitive list listing who would be paid back and in what order was presented to the courton Thursday.

In late October, U.S. Steel idled its coke-making operations where metallurgical coal is baked to convert it into coke, a key ingredient of steel indefinitely.

A report by the court monitor says 50 employees were laid off, while 60 were re-deployed within the Ontario plants as a result of the decision.

The restructuring hearings are set to resume onNov. 26in Toronto.