Ormet gets OK for changes to Steel Workers union bargaining agreement

By Jim Witters

Wilmington, Del., Nov. 15 - Ormet Corp. received approval for modifications to its collective bargaining agreement with the Steel Workers union, which covers union workers at the debtor's closed Hannibal, Ohio, plant, during a Nov. 15 hearing in the U.S. Bankruptcy Court for the District of Delaware.

Judge Mary F. Walrath approved the settlement with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union over the objections of Sunstone Development Co., Ltd. and the Steelworkers Pension Trust.

The judge said that the agreement represented the best outcome that could be achieved given the circumstances in the case and was the best option considering what could occur if the agreement was not approved.

"This is not fair for anybody. But it is fair in the context of the bankruptcy code. It is the best we can do," Walrath said.

Ormet attorney Kim Martin Lewis told the court that the company needs the union workers to maintain the Hannibal plant in case a buyer is found and to assist in the movement of excess inventory and other assets as they are sold.

However, the company would move to reject the collective bargaining agreement if the settlement was not approved, she said.

"We do not have the funds to make the payments," Lewis said.

The judge described the Ormet case as "a terrible situation" and said "it looks like we are facing a liquidation."

The case was thrown into turmoil in October when the Public Utilities Commission of Ohio returned an unfavorable ruling on Ormet's power rates, nixing a planned $130 million sale of the Hannibal plan to Smelter Acquisition, LLC.

Ormet received approval for the $39.4 million sale of its Burnside, La., plant to Almatis, Inc. during a Nov. 7 hearing. The revised union agreement does not apply to workers at the Burnside plant.

Agreement terms

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.

The agreement became effective with the entry of judge Walrath's order.

Objections raised

Sunstone attorney Mark Minuti challenged the union settlement, saying that it ran counter to the court's previous ruling that Ormet could pay administrative expenses incurred after Oct. 8, but not those incurred before.

The revised union agreement includes payments for health care costs and vacation pay accrued before the Oct. 8 cutoff, Minuti said.

Sunstone is seeking payment for $8.7 million worth of anodes delivered to the Hannibal plant before Oct. 8.

But Ormet's secured lenders plan to claim the proceeds of the inventory sales, saying that the anodes and other materials are part of their collateral.

The Steelworkers Pension Trust opposed the adjustments to the collective bargaining agreement, because the changes eliminate payments of $100,000 to $200,000 a month due from Ormet.

Trust attorney Neil J. Gregorio said those amounts are "going forward" costs for the debtors and should be included in the budget.

Gregorio characterized the union settlement as a means for stripping away the pension liabilities to make the Hannibal plant more attractive to potential buyers.

Judge Walrath rejected those arguments in the absencc of a viable alternative.

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.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.