The restructuring of Stelco Inc., a Hamilton, Ontario-based steel manufacturer was completed on March 31, 2006, more than two years after Stelco and certain of its subsidiaries filed for protection under the Companies' Creditors Arrangement Act (Canada). The restructuring of Stelco, with liabilities in excess of $3 billion, was completed through a plan of arrangement and reorganization under the CCAA and the Canada Business Corporations Act involving, among other things, the repayment of secured debt, the compromise of more than $600 million of unsecured claims and the restructuring of more than $1.4 billion of pension funding obligations.
Stelco's restructuring included the sale of a number of businesses not deemed to be core to Stelco's future. Early in the restructuring process consideration was also given to a sale of the whole of the business with industry heavyweights such as U.S. Steel and OAO Severstal conducting extensive due diligence on Stelco's assets and businesses.
After examining numerous options, an equity sponsorship group comprising Tricap Management Limited (Tricap), Sunrise Partners Limited Partnership (Sunrise) and Appaloosa Management L.P. (Appaloosa) led the final restructuring terms, collectively providing $108 million to Stelco in return for approximately 70 per cent of the new equity of Stelco.
Stelco completed a concurrent corporate reorganization where its operating businesses and assets were transferred into nine newly-created limited partnerships under their own management teams with Stelco remaining as a holding company.
Over the course of the Stelco CCAA proceedings, counsel engaged with the supervising judge, the Honourable Justice James Farley on over 100 occasions with the Ontario Superior Court of Justice granting approximately 70 different court orders and the Ontario Court of Appeal rendering five decisions with leave to the Supreme Court of Canada being sought in respect of two matters as the Stelco CCAA proceedings progress. Over 50 monitor's reports were filed with the Court by the Court appointed monitor Ernst & Young, representing what is believed to be a record number of reports for a Canadian insolvency.
Under the Plan, affected creditors received a pro-rata share of the $108 million of cash provided by the equity sponsors, new common shares in Stelco, warrants to purchase new common shares and US$235,070,000 of secured floating rate notes. As part of the restructuring, Stelco entered into various new lending arrangements, including a $600 million asset-based loan facility provided by CIT Business Credit Canada, Inc. (CIT), as administrative agent, and CIT and GE Canada Finance Holding Company (GE), as co-collateral agents, co-lead arrangers and lenders, a $375 million revolving term loan facility with an affiliate of Tricap, as agent and lender and a $150 million unsecured loan from the Province of Ontario (Ontario).
The Stelco CCAA proceedings created several new precedents in Canadian insolvency law. The Stelco CCAA proceedings established a new definition of what is meant by “insolvent” for the purposes of utilizing the CCAA for restructuring proceedings. The Stelco CCAA proceedings produced an appellate level decision clarifying the scope of the Court's jurisdiction to oversee corporate governance matters in the context of a restructuring corporate debtor. Stelco was also able to classify different types of debtholders such as senior, trade and subordinated creditors into a single class for the purposes of the eventual Plan and Stelco successfully defended this classification scheme before the Ontario Court of Appeal.
Stelco was represented by McCarthy Tétrault LLP with a team led by James Gage (bankruptcy and restructuring group), Blair Cowper-Smith (business) and Michael Barrack (litigation). Henry Wiercinski and Justin Lapedus led the financial services team. Other key participants included Daryl McLean, David Woollcombe, Andrew Parker, Lara Nathans, Ana Badour, Ormonde Benson, Gail Wong, Daniel Bornstein, Lianne Byrne and David Randell (business), Terry Dolan, Barbara Boake, John Salmas, Tony Kurian and Alison Ferguson-Woods (bankruptcy and restructuring), Geoff Hall, Junior Sirivar and Josh Koziebrocki (litigation), Tzen-Yi Goh and David Bross (real property and planning), Oliver Borgers (competition) and Jim Morand, Douglas Cannon, Patrick McCay and Catherine Fagnan (tax).
Stelco was also represented by Hicks Morley Hamilton Stewart Storie LLP in relation to labour and pension matters, with a team led by Stephen Shamie (labour) and Elizabeth Brown (pension) that included Lisa Mills, Stephanie Kalinowski, Rachel Arbour, Susan Nickerson and Sheldon Wayne (pension) and Lauri Wall (labour). Stelco was also represented by Scarfone Hawkins LLP in relation to real estate matters, with a team that included Joseph Speranzini, James Mahler and Donald Hawkins. Stelco was also represented by Timothy Barnes of LeBoeuf, Lamb, Greene & MacRae LLP in relation to United States restructuring litigation and corporate/finance matters, with a team that included Pamela Phillips and Christian Blalock (finance). Stelco was also represented by Kenneth Blackman, Edward Alterman, Mark Robertson, Jack Jacobson, Eli Weiss and Chaim Stern of Fried, Frank, Harris, Shriver & Jacobson LLP in relation to US securities, tax and related matters.
Stelco in-house counsel Bruce Futterer, vice-president, general counsel and corporate secretary, played an important role as the restructuring was completed and was assisted by Greg McNab, associate general counsel. The Stelco Board was represented by independent counsel, Peter Griffin and Lawrence Thacker of Lenczner Slaght Royce Smith Griffin LLP.
Osler, Hoskin & Harcourt LLP represented Tricap in connection with its sponsorship of the Plan and the revolving term loan facility. The Osler team was led by Edward Sellers and included Rupert Chartrand and Marc Wasserman (insolvency and restructuring), Peter Milligan, Dale Seymour, Michael Bertrand, Danna Donald and Jana Salloum (financial services), Jason Hanson and Allan Wells (labour), Donald Gilchrist, Eden Oliver, John Groenewegen, Paolo Berard and Robert Hughes (corporate), Ian McSweeney and Evan Howard (pension and benefits), Adrian Hartog and Rod Davidge (real estate), Monica Biringer and Ted Citrome (tax), Michelle Lally (competition), Jacqueline Code and Monica Creery (research) and Nancy Roberts (litigation).
Tricap was also represented by Goodman and Carr LLP with a team that included Aubrey Kauffman (litigation/ insolvency), Laurence Geringer (commercial/insolvency), Stuart Brotman (insolvency), Steve Watson, Anna Balinsky, Amy Harvey, Andrew Biderman, Andrew Sprague, Bonnie Freedman and Diane Brooks (commercial), Gary Litwack and Fraser McDonald (securities) and Janet Bobechko, Amanda Blitz and Peter Biro (environmental).
The Ontario Pension Benefits Guarantee Fund and the Province were represented by a team from Goodmans LLP that included Susan Rowland, Rob Chadwick, Fred Myers, Gale Rubenstein, Jana Steele, Ben Zarnett and Susan Zimmerman, and a team from the Ministry of the Attorney General that included Barbara LeVasseur of the Financial Services Commission of Ontario, and Craig Slater, Marilyn Stanley and Malle Hanslep from the Ministry of Finance.
Ernst and Young Inc. was the court appointed monitor of Stelco and was represented by ThorntonGroutFinnigan LLP with a team that included Robert Thornton, James Grout and Kyla Mahar. The monitor's team from Ernst & Young was led by Alex Morrison and included Tom Welsh, Tom Ayres, Brent Beekenkamp, Andrew Tuck, Todd Ambachtsheer, Adam Fisher and Donna Comerford. The monitor was represented by Evangelos Gegas of Dykema Gossett PLLC with respect to US matters, with a team that included Ronald Rose and Brendan Best.
Stikeman Elliott LLP represented CIT as administrative agent under the asset based loan facility with a team that included Sharon Polan, Craig Mitchell and Gwen Cheung (banking/insolvency), David Byers, Sean Dunphy and Ashley Taylor (litigation/insolvency), Gary Nachshen and Andrea Boctor (pensions) and Dana Porter and Corinne Pruzanski (real estate). GE was represented by Blake, Cassels & Graydon LLP with a team comprised of Kevin McElcheran and Mike Harquail.
The Informal Committee of Independent Noteholders was represented by McMillan Binch Mendelsohn LLP with a team led by Andrew Kent (debt products and restructuring) that included Paul Macdonald and Brett Harrison (litigation and restructuring) and Jeffrey Gollob, Waël Rostom and Adam Maerov (restructuring). McMillan Binch Mendelsohn also represented Sunrise and Appaloosa in their capacity as equity sponsors of the Plan with a team led by Andrew Kent that included Paul Macdonald, Waël Rostom, Stewart Ash, Brett Harrison and Mona Kumar (securities), Cheryl Stacey (debt products) and Karen Shaver (pensions).
The Senior Bondholders of Stelco, the largest group of affected creditors, were represented by Bennett Jones LLP with a team that included S. Richard Orzy, Kevin Zych and Raj Sahni (bankruptcy and restructuring), Robert Staley, Derek Bell and Alan Gardner (litigation), Jeff Kerbel, Art Peltomaa, Dan Ford, Steven Lutz, Scott Martyn and Christina O'Donnell (corporate, lending and securities), Stephen Bowman and Martin Sorensen (tax), Mary Beth Currie (labour and employment) and Deron Waldock (pensions). The Senior Bondholders were also represented by Debevoise & Plimpton LLP in relation to US securities matters, with a team that included Peter Loughran and Greg Feldman.
Stelco's restructuring included the sale of a number of businesses not deemed to be core to Stelco's future. Early in the restructuring process consideration was also given to a sale of the whole of the business with industry heavyweights such as U.S. Steel and OAO Severstal conducting extensive due diligence on Stelco's assets and businesses.
After examining numerous options, an equity sponsorship group comprising Tricap Management Limited (Tricap), Sunrise Partners Limited Partnership (Sunrise) and Appaloosa Management L.P. (Appaloosa) led the final restructuring terms, collectively providing $108 million to Stelco in return for approximately 70 per cent of the new equity of Stelco.
Stelco completed a concurrent corporate reorganization where its operating businesses and assets were transferred into nine newly-created limited partnerships under their own management teams with Stelco remaining as a holding company.
Over the course of the Stelco CCAA proceedings, counsel engaged with the supervising judge, the Honourable Justice James Farley on over 100 occasions with the Ontario Superior Court of Justice granting approximately 70 different court orders and the Ontario Court of Appeal rendering five decisions with leave to the Supreme Court of Canada being sought in respect of two matters as the Stelco CCAA proceedings progress. Over 50 monitor's reports were filed with the Court by the Court appointed monitor Ernst & Young, representing what is believed to be a record number of reports for a Canadian insolvency.
Under the Plan, affected creditors received a pro-rata share of the $108 million of cash provided by the equity sponsors, new common shares in Stelco, warrants to purchase new common shares and US$235,070,000 of secured floating rate notes. As part of the restructuring, Stelco entered into various new lending arrangements, including a $600 million asset-based loan facility provided by CIT Business Credit Canada, Inc. (CIT), as administrative agent, and CIT and GE Canada Finance Holding Company (GE), as co-collateral agents, co-lead arrangers and lenders, a $375 million revolving term loan facility with an affiliate of Tricap, as agent and lender and a $150 million unsecured loan from the Province of Ontario (Ontario).
The Stelco CCAA proceedings created several new precedents in Canadian insolvency law. The Stelco CCAA proceedings established a new definition of what is meant by “insolvent” for the purposes of utilizing the CCAA for restructuring proceedings. The Stelco CCAA proceedings produced an appellate level decision clarifying the scope of the Court's jurisdiction to oversee corporate governance matters in the context of a restructuring corporate debtor. Stelco was also able to classify different types of debtholders such as senior, trade and subordinated creditors into a single class for the purposes of the eventual Plan and Stelco successfully defended this classification scheme before the Ontario Court of Appeal.
Stelco was represented by McCarthy Tétrault LLP with a team led by James Gage (bankruptcy and restructuring group), Blair Cowper-Smith (business) and Michael Barrack (litigation). Henry Wiercinski and Justin Lapedus led the financial services team. Other key participants included Daryl McLean, David Woollcombe, Andrew Parker, Lara Nathans, Ana Badour, Ormonde Benson, Gail Wong, Daniel Bornstein, Lianne Byrne and David Randell (business), Terry Dolan, Barbara Boake, John Salmas, Tony Kurian and Alison Ferguson-Woods (bankruptcy and restructuring), Geoff Hall, Junior Sirivar and Josh Koziebrocki (litigation), Tzen-Yi Goh and David Bross (real property and planning), Oliver Borgers (competition) and Jim Morand, Douglas Cannon, Patrick McCay and Catherine Fagnan (tax).
Stelco was also represented by Hicks Morley Hamilton Stewart Storie LLP in relation to labour and pension matters, with a team led by Stephen Shamie (labour) and Elizabeth Brown (pension) that included Lisa Mills, Stephanie Kalinowski, Rachel Arbour, Susan Nickerson and Sheldon Wayne (pension) and Lauri Wall (labour). Stelco was also represented by Scarfone Hawkins LLP in relation to real estate matters, with a team that included Joseph Speranzini, James Mahler and Donald Hawkins. Stelco was also represented by Timothy Barnes of LeBoeuf, Lamb, Greene & MacRae LLP in relation to United States restructuring litigation and corporate/finance matters, with a team that included Pamela Phillips and Christian Blalock (finance). Stelco was also represented by Kenneth Blackman, Edward Alterman, Mark Robertson, Jack Jacobson, Eli Weiss and Chaim Stern of Fried, Frank, Harris, Shriver & Jacobson LLP in relation to US securities, tax and related matters.
Stelco in-house counsel Bruce Futterer, vice-president, general counsel and corporate secretary, played an important role as the restructuring was completed and was assisted by Greg McNab, associate general counsel. The Stelco Board was represented by independent counsel, Peter Griffin and Lawrence Thacker of Lenczner Slaght Royce Smith Griffin LLP.
Osler, Hoskin & Harcourt LLP represented Tricap in connection with its sponsorship of the Plan and the revolving term loan facility. The Osler team was led by Edward Sellers and included Rupert Chartrand and Marc Wasserman (insolvency and restructuring), Peter Milligan, Dale Seymour, Michael Bertrand, Danna Donald and Jana Salloum (financial services), Jason Hanson and Allan Wells (labour), Donald Gilchrist, Eden Oliver, John Groenewegen, Paolo Berard and Robert Hughes (corporate), Ian McSweeney and Evan Howard (pension and benefits), Adrian Hartog and Rod Davidge (real estate), Monica Biringer and Ted Citrome (tax), Michelle Lally (competition), Jacqueline Code and Monica Creery (research) and Nancy Roberts (litigation).
Tricap was also represented by Goodman and Carr LLP with a team that included Aubrey Kauffman (litigation/ insolvency), Laurence Geringer (commercial/insolvency), Stuart Brotman (insolvency), Steve Watson, Anna Balinsky, Amy Harvey, Andrew Biderman, Andrew Sprague, Bonnie Freedman and Diane Brooks (commercial), Gary Litwack and Fraser McDonald (securities) and Janet Bobechko, Amanda Blitz and Peter Biro (environmental).
The Ontario Pension Benefits Guarantee Fund and the Province were represented by a team from Goodmans LLP that included Susan Rowland, Rob Chadwick, Fred Myers, Gale Rubenstein, Jana Steele, Ben Zarnett and Susan Zimmerman, and a team from the Ministry of the Attorney General that included Barbara LeVasseur of the Financial Services Commission of Ontario, and Craig Slater, Marilyn Stanley and Malle Hanslep from the Ministry of Finance.
Ernst and Young Inc. was the court appointed monitor of Stelco and was represented by ThorntonGroutFinnigan LLP with a team that included Robert Thornton, James Grout and Kyla Mahar. The monitor's team from Ernst & Young was led by Alex Morrison and included Tom Welsh, Tom Ayres, Brent Beekenkamp, Andrew Tuck, Todd Ambachtsheer, Adam Fisher and Donna Comerford. The monitor was represented by Evangelos Gegas of Dykema Gossett PLLC with respect to US matters, with a team that included Ronald Rose and Brendan Best.
Stikeman Elliott LLP represented CIT as administrative agent under the asset based loan facility with a team that included Sharon Polan, Craig Mitchell and Gwen Cheung (banking/insolvency), David Byers, Sean Dunphy and Ashley Taylor (litigation/insolvency), Gary Nachshen and Andrea Boctor (pensions) and Dana Porter and Corinne Pruzanski (real estate). GE was represented by Blake, Cassels & Graydon LLP with a team comprised of Kevin McElcheran and Mike Harquail.
The Informal Committee of Independent Noteholders was represented by McMillan Binch Mendelsohn LLP with a team led by Andrew Kent (debt products and restructuring) that included Paul Macdonald and Brett Harrison (litigation and restructuring) and Jeffrey Gollob, Waël Rostom and Adam Maerov (restructuring). McMillan Binch Mendelsohn also represented Sunrise and Appaloosa in their capacity as equity sponsors of the Plan with a team led by Andrew Kent that included Paul Macdonald, Waël Rostom, Stewart Ash, Brett Harrison and Mona Kumar (securities), Cheryl Stacey (debt products) and Karen Shaver (pensions).
The Senior Bondholders of Stelco, the largest group of affected creditors, were represented by Bennett Jones LLP with a team that included S. Richard Orzy, Kevin Zych and Raj Sahni (bankruptcy and restructuring), Robert Staley, Derek Bell and Alan Gardner (litigation), Jeff Kerbel, Art Peltomaa, Dan Ford, Steven Lutz, Scott Martyn and Christina O'Donnell (corporate, lending and securities), Stephen Bowman and Martin Sorensen (tax), Mary Beth Currie (labour and employment) and Deron Waldock (pensions). The Senior Bondholders were also represented by Debevoise & Plimpton LLP in relation to US securities matters, with a team that included Peter Loughran and Greg Feldman.
Lawyer(s)
Greg McNab
Ormonde Benson
Firm(s)
McCarthy Tétrault LLP
McNab Legal