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U.S. Steel claims $2.2 billion on Canadian operation

U.S. Steel was shredded by financial experts claiming a $2.2 billion on the former Stelco on Monday trial.  

John Finnerty, who was hired by the provincial government to make an assessment of U.S.  Steel’s claims directly stated to the Superior Court: "It is my opinion from a financial economics perspective that the terms of the term and revolver loans ... are suggestive of their being equity rather than debt."

He added, "Im not saying that U.S. Steel was acting irrationally, only that it was acting like an equity investor, not a lender."

They said the difference is essential for U.S. Steel. If on the other hand, the Superior Court Judge Herman Wilton-Siegel decided that the company’s claim appears to be a legitimate debt, it shows as U.S Steel Canada’s largest creditor and seeing productive gains in improving the final outcome of Stelco’s restructuring under the protection of the creditor.  


If his decision is favored on the side of the association of workers, retirees and the provincial government contradicting the claim, the American parent company goes in the line of creditors waiting to get paid. 

Opponents consider the threat if U.S. Steel will win, as the restructuring that results little cash or no cash will hardly topped the Stelco/U.S. Steel Canada pension plans. It would result sharp cuts in retirement income for pensioners, along with a high pension insurance bill for the province and its easier for precedent companies to be copied. 

U.S. Steel claims over $2.2 billion in advance to a Canadian subsidiary through a term loan and a revolver loan. Finnersty assessed 15 measures of how the said loans were administered, it appears that most of them are equity injections rather than debt. 

Furthermore, he said, U.S. Steel decided interest payments to be waived through the revolver loan and agreed on U.S. Steel Canada to generate a large and early payment on the term loan’s principle, which is something that’s difficult to make without being penalized. 

He said, “It would be very unusual to see a borrower repay a large sum ... that has the character of a dividend, which is a feature of an equity situation."

Finnerty announced as well the money borrowed under one loan is for payments to remain under the other pointing to equity injections instead of a real debt. 


He mentioned, "Really, the revolver loan was being used as an equity instrument to take debt off the balance sheet of U.S. Steel Canada," He added, "The cash was just being round-tripped."

In addition, there were no financial covenants attached to the loan. Restrictions like the borrowing firm is required to meet either sales or revenue or debt to equity ratios. Failure to meet those targets with private lenders, is possible for a loan to be aligned into default and the company goes bankrupt. 

Finnerty said that those cash injections without covenants are equity investments. 

The case is anticipated to last on Tuesday with closing arguments.

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