Union: U.S. Steel Canada parent needs to prove $2 billion in claims

By Caroline Salls

Pittsburgh, April 14 – U.S. Steel Corp.’s demand for creditor preference of its more than $2 billion of claims over pensioners in the Companies’ Creditors Arrangement Act case of subsidiary U.S. Steel Canada Inc. was opposed by the United Steelworkers (USW), which called on the Ontario Superior Court of Justice to reject the parent company’s demand, according to a USW news release.

“Basically U.S. Steel says it owes itself and will take care of itself before fulfilling its legal obligations to its retirees,” USW Ontario director Marty Warren said in the release.

“We will do everything we can to defend the interests of our members and pensioners and ensure that U.S. Steel is held to its obligations.”

The USW said it filed documents challenging U.S. Steel’s claims that it is owed more than $2 billion as a creditor of its own subsidiary, and that its claims should be accepted as “proven.”

Specifically, the union said U.S. Steel is asking the court to accept its $122.4 million secured claim and unsecured claims of $127.8 million and C$1.85 billion.

“We reject the credibility of U.S. Steel’s claims, and we are certainly going to challenge these claims,” USW Local 8782 president Bill Ferguson said in the release.

“U.S. Steel’s claims should have to be proven in court, like any other claim.”

The USW said in the release that U.S. Steel, through its control of the Canadian subsidiary, has directed U.S. Steel Canada’s operations “in a way which has caused it to significantly underperform, requiring it to incur significant debts, and diluted the beneficiaries’ and the union’s recoveries in this proceeding.”

According to the release, U.S. Steel and its subsidiary are administrators of the pension plans and “as such, both entities owe fiduciary duties to the beneficiaries” of the pension plans.

“It is crucial that these claims be tested through a robust process, on a full evidentiary record, prior to a determination of this court as to their validity,” the union said.

The USW said the parent company’s secured claim is “based on security interests effectively granted by USS to itself, at a time when there was no independent board of directors or advisors, for insufficient consideration and in a manner which amounted to an improper preference and/or fraudulent conveyance.”

“A significant portion of U.S. Steel’s debt is really in the nature of equity and should be re-characterized as such,” the USW objection said.

Hamilton, Ont.-based U.S. Steel Canada’s operations are located at Lake Erie Works, a fully integrated steelmaking facility, and at Hamilton Works, a cokemaking and finishing facility. U.S. Steel is a Pittsburgh-based steelmaker.

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