A large part of whatever future the former Hamilton Stelco plants have will be decided in a Toronto courtroom starting Jan. 14.

That's when a six-day trial starts to decide if U.S. Steel's claims for $2.2 billion in debts from its troubled Canadian arm are valid. If the Pittsburgh-based company wins that point, it will have enormous power to shape whatever plan is hammered out to restructure the company.

With that power, workers, pensioners, the city and even the provincial government fear the final settlement will leave them with all the costs while the American parent company reaps all the benefits. That's despite company assurances all stakeholders will be involved in the restructuring.

In a court document, the salaried employees and retirees group argues, "The acceptance of a secured claim in favour of USS (U.S Steel) would result in any value achieved in the restructuring process flowing first to USS prior to reaching any other stakeholders."

Since U.S. Steel Canada, the former Stelco, filed for creditor protection in September 2014, U.S. Steel has filed 14 claims alleging it is owed more than $2.2 billion. That amounts to 90 per cent of all secured claims and half of all unsecured claims against the company.

That's in addition to more than $78.8 million owed to contractors and suppliers, including 190 companies in the Hamilton area, $830 million in pension underfunding, $790.2 million in postretirement health benefits for pensioners, and more than $150 million owed to the provincial government for pension aid given to get Stelco out of creditor protection in 2006.

A lawyer for the company has already warned a court hearing failure to approve the claims could result in a liquidation sale. Michael Barrack told a Superior Court hearing the failure to get the American company's claims approved has already scuttled a first effort to sell the mills in Hamilton and Nanticoke, and if that happens in a second sales effort there may be no choice but to liquidate the Hamilton icon.

The claims are opposed by the United Steelworkers union, two of its locals, an organization of active and retired salaried workers, the city, the Ontario government and a former Stelco president.

They fear if the American parent company is allowed to pay its claims off the top of the proceeds for a sale of the Hamilton and Nanticoke plants, there will be little to no cash available to top up underfunded pension plans.

Specifically, the province objects to U.S. Steel claims that $700 million paid to acquire Stelco, $510 million to repay Stelco debts and $251 million provided as working capital to Stelco and USSC are debt rather than equity. It also objects to more than $424 million advanced under a revolver loan between the companies.

They argue the American claims are nothing more than a "fraudulent preference" scheme to recover U.S. Steel's cost of buying Stelco and should be properly classified not as debt, but as an equity investment.

Equity investments, in a bankruptcy or restructuring, come dead last in the order of who gets paid.

Bob Milbourne, who led Stelco from 1991-1996, has said in court documents letting the Pittsburgh-based company get away with its plan "would constitute a fundamental distortion" of Canada's court-supervised restructuring process for troubled companies.

Milbourne argues that in its filings with the U.S. Securities and Exchange Commission, the parent company "characterized the injection of funds into Stelco as a straightforward acquisition of equity."

In three legal filings, Milbourne argues: "for undisclosed reasons, USS executed a series of complex legal and accounting transactions between Oct. 31, 2007 Aug. 26, 2015 … which had the effect of transferring some ($1.2 billion US) of USS's shareholders' investment to acquire Stelco to the balance sheet of USSC in the form of an interest bearing term loan payable to USS."

This was done, he said, without an independent board of directors "to review and verify that such a financial burden was sustainable by USSC or otherwise in its best interests."

Milbourne dismisses U.S. Steel Canada as nothing more than "a corporate shell devoid of any financial or managerial capacity."

He also attacks what he calls "manipulations" of Stelco/USSC finances.

As one example, he argues an advance of $470 million US under a revolver loan lacks "any meaningful financial or factual basis, and is, in fact, simply another manifestation of United States Steel Corporation's legal and accounting manipulations to recast its shareholders' costs … as debt owing to it by USSC, its Canadian shell company."

He and the other objectors also maintain that where a company borrowing money is allowed to manage its own affairs, USSC has always been under the complete control of the American parent and "played no role in the negotiation of the Term Loan. Instead … USS created a structure which financed the acquisition of Stelco with a mix of equity investments and purported debt advances that was determined solely by USS, taking into account only its interests."

The objectors also argue U.S. Steel's claims should be moved to the back of the line because of the way the American parents allegedly set its Canadian branch up to fail by stripping away production of steel for the auto industry, the highest value products the company has, cleaving up to $40 million in revenue from the Canadian arm.

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In business jargon, deciding what gets produced in which factory is called plant loading.

"I believe that the USS plant loading issue and the economic damage it will cause to USSC will have devastating impacts on USSC's restructuring efforts while it is under (creditor) protection," said Bill Missen, a former Stelco senior vice-president in a court filing.

"I am also concerned that the USS plant loading is only the beginning of the transfer of all high quality/high value business from USSC to USS, and will lead to the permanent shutdown of USSC with all the consequential deleterious effects on employees, retirees, creditors, the environment and other stakeholders."