UPDATE 1-Ontario court OKs U.S. Steel debtor financing for unit

Wed Oct 8, 2014 5:41pm EDT
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(Adds comment from U.S. Steel, background)

By Euan Rocha

TORONTO Oct 8 (Reuters) - A provincial court on Wednesday approved U.S. Steel Corp's C$185 million ($167 million) debtor-in-possession (DIP) financing facility for the company's Canadian unit and extended its protection from creditors until late January.

The subsidiary, U.S. Steel Canada, said the funding should allow it to operate until the end of 2015.

"The extension, together with the DIP financing announced today, enhances the prospects for U.S. Steel Canada and its stakeholders to come together to develop a viable plan of arrangement for the business," the Canadian unit's president and general manager, Michael McQuade, said in a statement.

Not all parties and creditors who objected to the structure of the DIP facility have consented, but they opted not to stand in the way in the interest of stabilizing operations in Canada, lawyers representing union workers and the province told the Ontario Superior Court of Justice.

U.S. Steel acquired its Canadian holdings, including a century-old operation in Hamilton and newer Lake Erie facilities in Nanticoke, Ontario, with the purchase of Stelco Inc in 2007.

However, the operations were soon bleeding red ink as demand for steel declined following the financial crisis.

U.S. Steel Canada sought a wide range of relief from the Ontario government - including environmental liability waivers, an extension on a pension funding deadline and forgiveness of a provincial loan - before it filed for creditor protection last month.

The company's Chief Restructuring Officer, William Aziz, said the financing will let it "carry on business in the ordinary course, continue to meet its obligations to employees and suppliers, provide payments for pensions and benefits to retirees, and ensure that customers have a continuous source of steel supply." (U.S. $1 = 1.1109 Canadian dollar) (Writing by Alastair Sharp; Editing by David Gregorio and Andre Grenon)