Essar Steel Algoma to be Purchased by KPS Capital Partners

The transaction includes sale of substantially all of the Company’s assets to a consortium of bidders formed by KPS and the Company’s pre-petition term lenders. The bid includes cash, a credit bid equivalent of the term loan, and the assumption of certain liabilities. In addition to the court approval process, closing the transaction is subject to a number of conditions relating to employee and benefit matters including pension plans and collective agreements, capital projects, and environmental matters.

“We are pleased that we have reached this point in the CCAA process and look forward to exiting. The new company formed by the consortium will securely position New Algoma with a capital structure to sustain all phases of the steel cycle, “ said Kalyan Ghosh, President and CEO of Essar Steel Algoma. “We are also well within the timeline set out in our restructuring plan.”

The transaction is slated to close on or before August 31, 2016 and business will continue as usual in the interim.

The purchase by KPS leaves open the possibility of a potential merger with US Steel Canada, should KPS win the bid in that sales process.

Earlier this week, Essar Steel Algoma received an extension of its CCAA credit protection through September 16.

Superior Court Justice Frank Newbould also denied a motion by the City of Sault Ste. Marie that would have required the immediate payment of a $7.1 million property tax bill by Algoma.

“I realize that the city needs the money,” wrote Newbould. “But there are others who need money that are not being paid….such as the special catch-up payments on pension obligations and payments to the Port of Algoma.”

The court monitor for Essar Steel Algoma said that paying the tax bill would prevent it from maintaining the $20 million cash threshold required by the DIP Facility and necessary for maintaining the undisrupted operation of Algoma.