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U. S. Steel Canada Attempting to Swap Financiers
07/22/2015 - According to a report by the CBC, after fielding threats their financing would be cut, U.S. Steel Canada is filing to replace its original bankruptcy lender, U.S. Steel (USS), with Brookfield as the creditor for a unique line of credit for bankruptcy proceedings, called debtor in possession (DIP) financing.
Brookfield was the former financier for Stelco in 2006, a year before the beleaguered steelmaker was sold to USS in 2007.
The date of the filing is curious to United Steelworkers Union (USW) Local 1005 president Gary Howe, who said the move to switch financiers is due to be heard in court 24 July — the same day the Companies' Creditors Arrangements Act (CCAA) proceedings were going to move into phase two, and release a refined list of bidders for the steel plants north of the border.
After heading into bankruptcy proceedings last September, 102 companies took a look at purchasing the plants in Hamilton and Nanticoke, and 39 submitted forms expressing interest. Phase two would have shaved that list down further, although it is noted in the latest CCAA filing, Howe said, that USS can ultimately deny a bid at their choosing.
The court documents filed ahead of Friday's appearance will attempt to replace USS' $185-million line of credit with a $150-million credit line from Brookfield.
Switch comes with costs
According to the filing, the switch was the result of USSC not supplying the Pittsburgh-based company a updated monthly budget, one that was requested on June 25. On July 7, lawyers for USS emailed USSC lawyers to say the parent company "is not, at this time, exercising its right to terminate its commitment to make any future DIP Advances, it is reserving and preserving its right to do so without further notice to the Borrower."
The threat sent USSC looking for a replacement DIP financier ahead of the stock-up season where steelmakers build up raw materials before the St. Lawrence Seaway freezes up in the winter.
The switch comes at a considerable cost, including a "commitment fee" of $4.5 million, and exit fee of $3-million, a monthly monitoring fee of $150,000 and an interest rate of up to 12 per cent, plus all expenses.
Howe said the costs would be paid to the financier ahead of pension top-ups, in the event of a liquidation.
Despite the costs, the union is supporting the new financier.
"We have previously made our concerns known to the court-appointed monitor that U.S. Steel has had too much control over the restructuring process and potential sale of its Canadian operations," said USW Ontario director Marty Warren.
"In principal we support the replacement of U.S. Steel in favour of an alternative, independent DIP lender for U.S. Steel Canada during the restructuring process."
Source: CBC Hamilton
The date of the filing is curious to United Steelworkers Union (USW) Local 1005 president Gary Howe, who said the move to switch financiers is due to be heard in court 24 July — the same day the Companies' Creditors Arrangements Act (CCAA) proceedings were going to move into phase two, and release a refined list of bidders for the steel plants north of the border.
After heading into bankruptcy proceedings last September, 102 companies took a look at purchasing the plants in Hamilton and Nanticoke, and 39 submitted forms expressing interest. Phase two would have shaved that list down further, although it is noted in the latest CCAA filing, Howe said, that USS can ultimately deny a bid at their choosing.
The court documents filed ahead of Friday's appearance will attempt to replace USS' $185-million line of credit with a $150-million credit line from Brookfield.
Switch comes with costs
According to the filing, the switch was the result of USSC not supplying the Pittsburgh-based company a updated monthly budget, one that was requested on June 25. On July 7, lawyers for USS emailed USSC lawyers to say the parent company "is not, at this time, exercising its right to terminate its commitment to make any future DIP Advances, it is reserving and preserving its right to do so without further notice to the Borrower."
The threat sent USSC looking for a replacement DIP financier ahead of the stock-up season where steelmakers build up raw materials before the St. Lawrence Seaway freezes up in the winter.
The switch comes at a considerable cost, including a "commitment fee" of $4.5 million, and exit fee of $3-million, a monthly monitoring fee of $150,000 and an interest rate of up to 12 per cent, plus all expenses.
Howe said the costs would be paid to the financier ahead of pension top-ups, in the event of a liquidation.
Despite the costs, the union is supporting the new financier.
"We have previously made our concerns known to the court-appointed monitor that U.S. Steel has had too much control over the restructuring process and potential sale of its Canadian operations," said USW Ontario director Marty Warren.
"In principal we support the replacement of U.S. Steel in favour of an alternative, independent DIP lender for U.S. Steel Canada during the restructuring process."
Source: CBC Hamilton
