Wabush – July 6, 2015
July 6, 2015
On June 22, 2015, a number of motions proceeded before Mr. Justice Hamilton as discussed below:
a) Motion to appoint Representatives and Representative Counsel to all non-union employees and retirees of Wabush:
As noted above, on June 22, 2015, Michael Keeper, Terence Watt, Damien Lebel, and Neil Johnson were appointed by the court as Representatives of all Non-Union Active Employees and Retiree Beneficiaries and Koskie Minsky LLP was appointed as Representative Counsel.
b) Motion by company for approval of priority for the debtor-in-possession (“DIP”) lender:
In order to provide funds to Wabush in the CCAA proceedings, a company called Cliffs Mining Company, which is a wholly-owned subsidiary of Cliffs Natural Resources Inc., the ultimate parent company of Wabush, agreed to loan funds to Wabush while it is under CCAA protection. This type of loan is known as a “DIP” loan and as a condition of such a loan amounts the DIP lender sought first priority recovery for its loan ahead of all payments owing to the claims of other creditors of the company. At the motion hearing on June 22, 2015, the DIP lender requested the court’s approval for such super-priority recovery ahead of the statutory deemed trust priorities in favour of pension plan beneficiaries contained in the Newfoundland Pension Benefits Act and the federal Pension Benefits Standards Act. Such deemed trusts operate to give priority recovery to pension beneficiaries for certain amounts owing to pension plans by an employer that the employer has not paid.
In a decision released on June 26, 2015, Mr. Justice Hamilton granted the requested priority to the DIP lender.
c) Motion by company to suspend payments of certain amounts owing to the pension plans, suspend payment of supplemental pension benefits, and to suspend provision of health and life insurance benefits:
The company also requested the court’s approval to not pay special payment amounts it is obligated to pay to the underfunded Wabush pension plans, suspend payment of supplemental pension benefits and to not pay health and life insurance premiums to Sun Life Insurance (the provider of such benefits to eligible employees and retirees). We argued that while the amount of “special payments” owing to the Wabush pension plans can be temporarily suspended while further money is recovered by the company, there are nevertheless currently sufficient funds in the company’s account to permit the company to continue paying supplemental pension benefits and to continue to pay the premiums to Sun Life so that health and life benefits can continue.
Unfortunately, in his decision dated June 26, 2015, Mr. Justice Hamilton permitted the company to suspend all the payments as requested by the company.
We are in discussions with the Client Committee with respect to next steps in this matter and will report to the non-union employees and retirees further, as soon as possible.