It's been 26 months since Essar Steel Algoma Inc. was granted protection from its creditors under the federal Companies' Creditors Arrangement Act.
A lot has changed since then. Business conditions are much more favourable.
Now, the Sault steelmaker is complaining that every month it continues under insolvency protection is costing $2 million in lost profitability.
If federal CCAA proceedings drag into next year and extend further into 2020, Algoma says its lost profits will grow to $4 million a month.
Hundreds of pages of fresh court documents filed so far in 2018 paint a picture of a company itching to break free of court-ordered controls, eager to undertake major capital projects to ensure its long-term viability.
Still no agreement with Steelworkers
One major obstacle preventing Algoma from emerging from CCAA insolvency protection is the lack of collective agreements with its two biggest union locals: United Steelworkers Local 2251 and 2724.
Salaried workers, represented by Local 2724, have been without a contract since March 2016.
Hourly employees, represented by Local 2251, have had no contract since July 2016.
Right now, all negotiations under Ontario's Labour Relations Act are suspended and will be resumed only when the judge presiding over Essar's CCAA proceedings provides specific authorization.
Interestingly, court records show little bargaining progress during talks conducted under federal insolvency law, with substantial movement occurring on those occasions when the judge has eased Algoma's CCAA obligations and allowed talks to proceed under provincial labour law.
Capital expenditures needed
Has the lifeline that saved Essar Steel Algoma two years ago now turned into a choke-collar that's strangling the steel mill's future prospects?
"Remaining in CCAA protection places an added cost burden on Algoma's business and constrains its access to needed capital expenditure funding," says Brian Denega, the court-appointed monitor who's overseen Algoma's CCAA file since November 2015.
"These and other factors have direct negative effects on the profitability of the business," Denega says in his most recent update to the court. "There is urgency to the completion of the recapitalization transaction and Algoma's restructuring at the present time."
Provincial election
As SooToday reported last week, the company is feeling under the gun with a provincial election just five months away.
"Algoma's progress in discussions with provincial government representatives on capital expenditure funding, pension arrangements and environmental liabilities provides a further reason to move forward as soon as possible with the recapitalization transaction and Algoma's restructuring," Denega says.
"If a transaction does not move forward permitting definitive arrangements to be reached in advance of the rising of Ontario's legislature for the provincial elections set for June 7, 2018, Algoma and its stakeholders may be subject to further uncertainty and delay."
"Algoma is concerned that it must have final provincial government and regulatory approval of pension regulations by no later than March 31, 2018 and that significant lead time will be necessary to achieve these approvals," the monitor says in his latest report.
Monetary proposals
Algoma "is facing serious time constraints if they are to emerge prior to the upcoming provincial election," adds John Strek, court-appointed chief restructuring officer.
"It is necessary to obtain approval of pension plan regulations prior to the government rising for the election. It is therefore imperative that the applicants reach agreements with the unions in the short term," Strek says in an affidavit sworn this week. "Efforts to reach agreements with the unions through direct negotiations as well as through a court-ordered mediation process have failed to resolve the labour-related issues to date. In the most recent negotiations, the unions have refused to negotiate monetary proposals until all non-monetary matters are addressed, and the parties have been unable to reach agreement on all non-monetary issues."
Jim Rennie, Algoma's vice-president of human resources, says in an affidavit that Algoma and USW Local 2251 reached agreement during seven Labour Relations Act (LRA) bargaining sessions early in 2017 on all 157 non-monetary items. Both parties also made monetary proposals at that time.
Provincial talks suspended
On Mar. 6, Justice Frank Newbould suspended the LRA talks until further notice and CCAA-based mediation was ordered to take place from Mar. 22 to Mar. 31.
Those mediation efforts were "adjourned by the end of the following week with no meaningful progress towards achieving collective agreements or any resolution with the retirees having been achieved," Rennie reported.
A series of CCAA-based negotiations then took place from Oct. 4 to Oct. 17 involving the two Steelworkers locals and the term lenders who intend to recapitalize Algoma.
"At the outset of this latest round of bargaining, the consenting creditors made significant moves with respect to their submitted proposals," Rennie said.
Company withdraws request for wage concession
"Specifically, they have removed their request for a 10 per cent wage concession, they have removed their request for the elimination of the vacation bonus, and they have removed their request for a 10 per cent co-pay on health benefits and the mandatory use of therapeutic substitution for prescription drugs."
"The consenting creditors and I met 14 times with Local 2251 and 10 times with Local 2724. The consenting creditors made both non-monetary and monetary proposals to Local 2251, however, the parties have not made any material progress. These CCAA-based discussions have involved the restoration to the table by Local 2251 of all of the non-monetary proposals it had withdrawn under the previous bilateral LRA bargaining . . . as well as the addition of a significant number of new non-monetary proposals by Local 2251."
"In addition, whereas Local 2251 had, under the earlier LRA bargaining, made an explicit monetary proposal, it has, under the most recent CCAA-based discussions, refused to table a monetary proposal. Local 2724 has also refused to negotiate monetary items under the CCAA-based process mandated by the March 6 endorsement, indicating that they will not commence monetary negotiations until such time as Local 2251 has commenced monetary discussions."
119 non-monetary issues outstanding
"Despite the number of meetings that have taken place since October 2017, the parties have not made any meaningful progress on the resolution of non-monetary issues," Rennie said in an affidavit sworn on Jan. 5.
"There are currently 119 non-monetary proposals outstanding, the majority of which are issues that had previously been withdrawn by Local 2251 in February 2017."
"The subject of the outstanding non-monetary proposals includes a proposal for the inclusion of the Joint Health, Safety and Environmental Manual into the expired 2251 collective agreement, lessening the management rights clause, improvements to short-term benefit adjudication and removing the current seniority rights of employees promoted out of Local 2251. No progress on monetary issues has been made at all."
The term lenders have informed Algoma that they are unable to move on remaining non-monetary proposals unless a global agreement, one involving monetary items, can be reached, Rennie said.
The consenting creditors informed Local 2251 and Local 2724 in December that unless the Steelworkers were willing to discuss monetary items, no further, meaningful progress could be made at the bargaining table.
What about retirees?
Rennie is especially concerned that so far there've been no meaningful discussions with Algoma's retirees.
As the negotiations drag on with no end in sight, assets in the wrap pension plan, covering employees of predecessor company Algoma Steel Inc. are being depleted," Rennie says.
"The longer this process continues without resolution and the longer the applicants are prevented from emerging from CCAA, there will be more likelihood of a detrimental impact upon the wrap retirees. Additionally, the continuation of the CCAA process results in expenditures that could otherwise be applied to Algoma's capital needs. No further dates have been scheduled for negotiations," Rennie says.
Essar Steel Algoma Inc. and related companies are asking Ontario's Superior Court of Justice to allow collective bargaining talks to resume under Ontario's Labour Relations Act.
The matter is expected to be heard on Jan. 25.