Algoma seeks lift of stay of collective bargaining

Essar Steel Algoma

Algoma Inc. wants a judge to lift a stay of proceedings to allow collective bargaining efforts with its unions to resume.

It also wants mediators Warren Winkler and William Kaplan previously assigned to the file to remain on board and help with the process.

The matter will be heard in a Toronto court Jan. 25.

The order to resume negotiations and secure collective agreements with the unions is necessary in order to bring Algoma’s Companies Creditors Arrangement Act (CCAA) proceedings to a close and complete the asset purchase agreement, a motion filed with the courts state.

“Consenting creditors have reached a confidential agreement in principle with the City of Sault Ste. Marie and are optimistic that agreements with the Province of Ontario and the federal government with respect to capital expenditure programs and environmental issues will be finalized on a timely basis,” the 13 page document reads.

Negotiations with the unions have been at a standstill and Algoma cannot restructure without those agreements, including necessary amendments to pension funding.

The collective agreement with Local 2251 expired July 31, 2016 and with Local 2724 on March 31, 2016. The statutory freeze between the unionized workers and the company remains in effect.

The motion also notes that the clock is ticking and time is a factor. In order to implement all of the necessary agreements between the consenting creditors, the unions and the retirees, a multiple-step process expected to take eight to 12 weeks must be followed to gain the approval and support of the provincial government.

“It is necessary to complete the regulation approval process before the government rises for the election,” the motion states. “Therefore, the applicants believe that it is necessary to obtain final approval of the regulation by no later than March 31, 2018.”

Algoma believes that in order to complete the restructuring prior to the provincial election, lifting the stay will allow the applicants to engage in negotiations with the unions.

Algoma has been in CCAA protection since Nov. 9, 2015.

Consenting creditors have said the markets are favorable to emerge from CCAA protection as quickly as possible.

Algoma “can no longer afford to delay pursuing the Recapitalization Transaction, which continues to represent Algoma’s best and only viable prospect to continue as a going enterprise for the benefit of all of Algoma’s stakeholders,” the motion reads.

The documents state the recapitalization transaction will reduce Algoma’s debt by about $1.2 billion, provide new financing of up to US$300 million plus a new asset backed loan facility of US$125 million to fund operations and CCAA exit costs, and provide liquidity to fund capital expenditures over the next five years.

It will also preserve jobs in Sault Ste. Marie, ensure customer confidence and maintain the Algoma pension plans on the company’s balance sheet with an amount of funding to be agreed to.

Algoma’s main competitor has emerged from its CCAA restructuring and recently completed a successful initial public offering.

External market conditions are conducive to a successful restructuring with the price of steel near its 52-week high.

In addition, the debt markets are robust and there is a demonstrated interest in steel investments.

Algoma is also closely monitoring negotiations between Canada and the United States regarding NAFTA. A termination of the agreement could have negative effects on the steelmaker.

Attempts between the company and the union to negotiate new collective agreements reached an impasse in December 2016.

In 2017, several procedural hiccups occurred between the company and the union resulting in a judge’s order that negotiations be suspended and a private mediation session be held. No meaningful progress to achieve collective agreements with the union occurred between March and October.

The court documents state that negotiations between the consenting creditors and both unions reconvened in October for 2 days.

In total, the company and Local 2251 met 13 times and the company with Local 2724 nine times. The union has refused to negotiate monetary items and no progress has been made in the process, the company reports.