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Judge OKs U. S. Steel's Divorce From Its Canadian Operation
10/12/2015 - A Canadian judge has approved the split between United States Steel Corporation and its Canadian subsidiary, U. S. Steel Canada Inc. (USSC).
The agreement, approved 9 October 2015, is a significant step toward making USSC a stand-alone company. U. S. Steel, therefore, will discontinue sales support to USSC. It also will shift steel production to its American mills and begin halting technical and engineering services. U. S. Steel will, however, continue to provide certain back-office support for up to 24 months.
Additionally, U. S. Steel will refrain from bidding on USSC, should USSC enter into a new sales and restructuring process.
According to Canada's The Globe and Mail newspaper, the agreement likely will generate new bids for the company, which had been on the sales block until that process was halted earlier in the month.
According to the newspaper, potential bidders were put off during the first sales effort by a process they believed was skewed in favor of U. S. Steel, sources said.
“There are people out there who want to rebid,” an unidentified source involved in discussions about the future of USSC told the newspaper. “Now, we have a sensible sales and restructuring process.”
The deal also excuses the newly independent USSC from providing retiree health benefits and pension fund obligations, according The Hamilton Spectator newspaper.
The newspaper reported that as of 9 October, more than 20,600 were cut off from health insurance benefits. Also, it said, the company is being excused from pension fund obligations. Retirees' pension checks won't immediately be affected, the newspaper said, because there is enough money in the fund to cover those costs for the foreseeable future.
However, the United Steelworkers union told the newspaper that the drain is troubling for the longer term.
U. S. Steel said USSC represented approximately US$1 billion of U. S. Steel's consolidated employee benefits liability as of 30 June 2014.
USSC has been operating under creditor protection for the past year. Prior to the September 2014 filing, USSC recorded an aggregate operating loss of about US$2.4 billion, or more than US$16 per diluted share, since December 2009.
Even as an independent company, USSC's future is far from certain.
As the Globe and Mail reported, until the business is sold, the challenge will be to is re-establishing itself amid a severe downturn in North American steel markets and making up for the loss of revenue caused by the shifting of steel production.
Additionally, U. S. Steel will refrain from bidding on USSC, should USSC enter into a new sales and restructuring process.
According to Canada's The Globe and Mail newspaper, the agreement likely will generate new bids for the company, which had been on the sales block until that process was halted earlier in the month.
According to the newspaper, potential bidders were put off during the first sales effort by a process they believed was skewed in favor of U. S. Steel, sources said.
“There are people out there who want to rebid,” an unidentified source involved in discussions about the future of USSC told the newspaper. “Now, we have a sensible sales and restructuring process.”
The deal also excuses the newly independent USSC from providing retiree health benefits and pension fund obligations, according The Hamilton Spectator newspaper.
The newspaper reported that as of 9 October, more than 20,600 were cut off from health insurance benefits. Also, it said, the company is being excused from pension fund obligations. Retirees' pension checks won't immediately be affected, the newspaper said, because there is enough money in the fund to cover those costs for the foreseeable future.
However, the United Steelworkers union told the newspaper that the drain is troubling for the longer term.
U. S. Steel said USSC represented approximately US$1 billion of U. S. Steel's consolidated employee benefits liability as of 30 June 2014.
USSC has been operating under creditor protection for the past year. Prior to the September 2014 filing, USSC recorded an aggregate operating loss of about US$2.4 billion, or more than US$16 per diluted share, since December 2009.
Even as an independent company, USSC's future is far from certain.
As the Globe and Mail reported, until the business is sold, the challenge will be to is re-establishing itself amid a severe downturn in North American steel markets and making up for the loss of revenue caused by the shifting of steel production.
