United States Steel’s Canadian subsidiary to file for CCAA protection

By Kali Hays

New York, Sept. 16 – United States Steel Corp. said that its Canadian subsidiary, U.S. Steel Canada Inc., will apply for creditor relief under Canada’s Companies’ Creditors Arrangement Act after a unanimous decision by the company’s board of directors, according to a Tuesday news release.

U.S. Steel Canada has recorded an operational loss in an aggregate amount of $2.4 billion since December 2009 and represents about $1 billion of United States Steel’s consolidated employee benefits liability as of June 30.

United States Steel will provide its Canadian subsidiary with C$185 million of secured debtor-in-possession financing to fund operations through 2015.

United States Steel president and CEO Mario Longhi said that “a planned restructuring will allow U.S. Steel Canada to operate and compete more effectively while exploring restructuring alternatives.”

According to the release, the CCAA filing is an event of default under the terms of U.S. Steel Canada’s Province Note loan agreement with a principle amount of C$150 million due immediately.

A failure to pay the Province Note would trigger a default under the indenture for United States Steel’s 2.75% senior convertible notes due 2019.

United States Steel said the notes are “currently trading well above par” but if the default occurred it plans to use cash to pay the outstanding principle amount of $316 million.

United Sates Steel also said it has decided not to proceed with an expansion at its iron ore pellet operations in Keewatin, Minn., and that it will forgo further development of carbon alloy facilities in Gary, Ind.

The permits for the iron ore operations expire in September and will not be renewed, according to the release.

“The estimated capital investment that would have been required to complete these projects was in excess of $800 million. These two strategic actions will result in a non-cash pre-tax charge of approximately $250 million in the third quarter,” the release stated.

United States Steel is an integrated steel producer based in Pittsburgh with operations in the United States, Canada and Central Europe.

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