The province of Ontario said on Wednesday that it has signed an agreement with equity fund Bedrock Industries LP to restructure U.S. Steel Canada, but the deal still requires approval from other stakeholders and a Canadian court.
The plan, in a memorandum of understanding, must still be accepted by U.S. Steel Canada, which has been in creditor protection since September 2014, and the court supervising the company’s credit protection proceeding, Ontario’s government said in a statement.
Bedrock, a private equity fund focused on metals, mining and natural resources, must also complete negotiations for new collective agreements for workers at Hamilton and Nanticoke facilities for the deal to proceed, said the United Steelworkers union.
Under the agreement, Bedrock will purchase and continue operating U.S. Steel Canada’s plants in Hamilton and Nanticoke, said the union, which has been briefed on the agreement.
The province, which made loans to former U.S. Steel Canada parent United States Steel Corp (X.N), said terms of the agreement are confidential.
U.S. Steel Canada employs nearly 2,000 workers in Ontario and has the capacity to produce 2.6 million tons of steel annually.
“The deal announced today is far from perfect, given the challenges that arise from such a lengthy and complex insolvency process,” said United Steelworkers Ontario director Marty Warren, in a statement.
“However, we believe this could lead to a good final deal for the union’s members and retirees.”
William Aziz, U.S. Steel Canada’s chief restructuring officer, said the company welcomed the “constructive engagement.”
In early August, U.S. Steel Canada rejected a buyout offer from Ontario Steel Investments, a group including shareholders of Essar Global. It said that Essar, an Indian energy and resources conglomerate, failed to demonstrate its financial ability to own and operate the company and did not gain support from all stakeholders.
That offer included the assumption of C$954 million ($722.51 million) in liabilities under U.S. Steel Canada’s pension plan and a commitment of C$25 million for post-employment benefits for U.S. Steel Canada’s staff.