U.S. Steel's Canadian unit to file for creditor protection
By Devika Krishna Kumar (Reuters) - United States Steel Corp said its Canadian arm would apply for relief from creditors under Canada's Companies' Creditors Arrangement Act and said it would drop plans to expand two of its facilities. Shares of the company, which also said it expects current-quarter results, excluding items, to be "significantly" higher than Wall Street expectations, jumped 6.7 percent after the bell. The company said its Canadian operations, which have lost about $2.4 billion over the past five years, will also be dropped from its financial statements. U.S. Steel said it would provide its Canadian arm with $185 million Canadian dollars ($168.6 million) of secured debtor-in-possession financing (DIP Financing) to support operations through the end of 2015. U.S. Steel Canada, formerly known as Stelco, accounts for about $1 billion of U.S. Steel's consolidated employee benefits liability as of June 30. U.S. Steel acquired the Hamilton mill in its takeover of Canadian steelmaker Stelco in 2007, shortly before the 2008 global financial crisis that crippled the steel industry worldwide. The Pittsburgh-based steelmaker has since had a rough relationship with both its Canadian workers and the federal government. The company said on Tuesday it decided not to proceed with an expansion at its iron ore pellet operations in Minnesota and to stop additional investments into the carbon alloy facilities at Gary Works, Indiana. U.S. Steel said it found its current production capability to be "sufficient", after considering its future raw material needs for iron ore and coke. Iron ore has fallen nearly $50 a tonne so far this year, as major miners flood the market with new supply and a slowdown in China’s economic growth leads to uncertain demand. However, the company remains confident of its financial performance and said it expects significant improvement in operating income for its reportable segments in the third quarter ending September. "Steel market conditions in the U.S. have remained stable and our operations have performed well," U.S. Steel said in a statement. Analysts on average expect the company to earn 89 cents per share in the third quarter, according to Thomson Reuters I/B/E/S. The cost to complete the two projects would have been over $800 million, the company said. U.S. Steel expects the cost-cutting measures to result in a charge of about $250 million in the third quarter. Shares of the company closed at $41.41 on the New York Stock Exchange on Tuesday. (Reporting by Devika Krishna Kumar in Bangalore; Editing by Ken Wills)
