Ormet, Steel Workers reach accord on Hannibal bargaining agreement

By Jim Witters

Wilmington, Del., Nov. 13 - Ormet Corp. is seeking approval of modifications to its collective bargaining agreement with the Steel Workers union that covers union workers at the closed Hannibal, Ohio, plant, according to documents filed Nov. 12 with the U.S. Bankruptcy Court for the District of Delaware.

The plant closed in October immediately after Ormet received an unfavorable ruling from the Public Utilities Commission of Ohio that killed the planned $130 million sale of the Hannibal plant to Smelter Acquisition LLC.

The proposed agreement with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union would not affect Ormet's workers at its Burnside, La., facility.

As of the bankruptcy petition date, Ormet employed 1,188 workers at the two plants. About 980 are represented by the union.

Ormet and the union executed a memorandum of agreement on Jan. 12, 2013 and extended it four times in anticipation of the debtors achieving a financial restructuring.

With Ormet now in wind-down mode regarding the Hannibal facility, the union and the company "have taken all appropriate measures ... to preserve the assets and maximize remaining value at the facility," according to court documents.

"Unfortunately, the economic reality is that, without operations at the Hannibal facility, employment levels have been substantially reduced, with the debtors continuing to reduce employment to the minimal level necessary to preserve the ongoing value of the assets," the filing states.

Proposed agreement

Under the settlement, Ormet will adjust insurance benefits, supplemental unemployment benefits, vacation pay, pension benefits, a voluntary employees' beneficiary association (VEBA) arrangement and other retiree benefits.

Specifically, the settlement calls for the following:

• Insurance benefits for inactive or laid-off workers would be suspended as of Oct. 25;

• Insurance benefits for active employees would continue through the agreement effective date;

• Effective Nov. 1, Ormet will implement a different health benefits plan for active employees at no premium cost to the workers;

• On the settlement effective date, Ormet will create an escrow account and deposit $1.4 million to be used "exclusively to provide payment for the incurred but not reported claims";

• Supplemental unemployment benefits will be suspended on the settlement effective date;

• Vacation pay for active employees will be paid under the terms of the Hannibal collective bargaining agreement.

The 2013 vacation pay owed to laid-off or other inactive employees will be paid in the next payroll period following the effective date.

The 2014 vacation pay of any laid-off or inactive employee will be treated as an allowed administrative expense claim and will be determined on an individual basis;

• The pensions section of the CBA will be modified to terminate any obligation of the debtors to participate in the Steelworkers Pension Trust.

Under the defined contribution pension plan for represented employees, the company will implement terms outlined in a Feb. 25, 2013 restructuring memorandum, except that the provisions obligating Ormet to make contributions on behalf of laid-off or inactive workers will be suspended;

• The VEBA will be granted an allowed administrative expense claim of $8.02 million and an allowed general unsecured claim of $39.39 million; and

• The debtors' obligation to pay opt-out payments to eligible beneficiaries will be suspended.

Eligible beneficiaries will have an allowed administrative expense claim relating to the unpaid opt-out payment owing for the third quarter of 2013.

Ormet is requesting a Nov. 15 hearing on the proposed agreement.

Ormet, a Hannibal, Ohio-based producer of aluminum, filed for bankruptcy on Feb. 26, 2013 in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 11 case number is 13-10334.

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