HAMILTON—Ontario Superior Court Justice Herman Wilton-Siegel has handed down a long-awaited ruling in the bankruptcy proceedings surrounding U.S. Steel Canada.
The court battle centred on more than $2 billion in loans paid by Pittsburgh-based U.S. Steel to its then subsidiary USS Canada following the Stelco acquisition in 2007. The government of Ontario and the United Steelworkers union have maintained the funds were extended to USS’s Canadian operation as “equity” rather than debt, while USS has said it expected the funds to be repaid.
Following the court proceedings, Justice Herman Wilton-Siegel sided with USS, saying of one of the loan claims made by Ontario and the USW: “I find that the objecting parties have not satisfied the onus of demonstrating that the USS expectation of repayment with interest of the principle of the Term Loan as of December 31, 2007 was unreasonable.”
As a result of this intention to be repaid, as well as a wide range of other factors, the judge ruled the claims constituted debt as opposed to equity under the Companies’ Creditor Arrangement Act—a decision that realigns the cash-strapped Canadian steel producer’s financial priorities in favour of USS. The contentious decision could have a significant impact on 20,000 steelworker pensioners, who now must take a back seat to USSC’s more than $2 billion debt obligation to its former American parent.
Following the ruling, the USW said it “disagrees and is disappointed” with the judge’s decision. The union added that it is reviewing the ruling with counsel while it remains focused on fighting for the pensions and benefits of retirees as well as restructuring USSC to ensure good jobs for people in Nanticoke and Hamilton.
“We can certainly say that we disagree with much of what the judge has decided,” USW Ontario Director Marty Warren, said. “If U.S. Steel was technically insolvent before it tried to convert its equity or unsecured debt into secured debt, then it should not be allowed to do it.”
“This is an insult to thousands of workers and pensioners who should be considered first and foremost in this process,” Gary Howe, president of USW Local 1005, added.
The decision may now find its way to higher courts through the appeal process. Speaking with CBC following the parties’ final day in court last month, Howe forecast a protracted legal battle regardless of the initial outcome.