Steel Mills

Essar Steel Algoma Paying Down Debt

March 30, 2017

Essar Steel Algoma is making progress on paying its debts. According to the latest (27th) Monitors report, Algoma has repaid $42.7 million as of March 25, 2017 through weekly “cash sweeps” to its Debtor in Possession lenders. Another $2.5 million will be paid on April 3 which will result in reducing the outstanding balance under its second DIP Amendment to approximately $164.8 million.

The extension of Algoma’s funding to a third DIP amendment requires the payment of a forebearance fee of $1.25 million and a further extension fee of $800,000. As of May 5, 2017 the outstanding balance of the DIP is estimated at US $165 million and cash balance for the company CAD $28 million (approximately $21 million USD).

Raw material inventory is expected to absorb improved revenue as the company restocks following the opening of the Great Lakes shipping season. Operating cash flow is expected to total $12 million (US$ 9 million).

Payments for monthly cargo handling to Portco were suspended as of May 2016 pending resolution of an oppression act against Essar Global.

Mediation discussions are ongoing between the USW, DIP lenders and Algoma management and are being conducted under a media blackout.

Said court monitor Brien Denega in his report, “The Company has engaged with both Locals 2724 and 2251 in collective bargaining discussions. Where this process will lead remains highly uncertain at this time. Potential labour disruptions in this process, if any, would severely impact the Company’s operations and cash flow over next several months. In this scenario, the Projection does not contemplate any business disruptions other than certain preparedness efforts.”

Essar Steel Algoma is hoping to resolve labor discussions in order to facilitate the restructuring and have asked for a Stay Extension under CCAA until April 30, 2017.