Steel Mills

Essar Steel Algoma Requests Fourth Extension of DIP Financing

May 21, 2017

Essar Steel Algoma is asking for debtor-in-possession financing to be extended a fourth time until Aug. 30, 2017. In the 31st report of the Monitor, Brian Denega asked that the extension be approved and that a Restructuring Committee be established to take some of the burden of negotiations and restructuring off key executives who can then devote more time to effectively managing Algoma’s business.

Essar Steel Algoma CEO Kaylan Ghosh, Andrew Schultze, Holding Capital Group; and Courtney Pratt, former CEO of Stelco, were selected for the Restructuring Committee, pending court approval.

Chief Restructuring adviser John Strek said the CCAA proceedings are at a critical state:

“To date, while considerable progress has been made with some key stakeholders, the Consenting Creditors and other key stakeholders have not successfully negotiated the necessary agreements to achieve a comprehensive going concern restructuring solution. The Consenting Creditors’ negotiations with the various governmental entities have been constructive and are advancing. However, negotiations with the Unions have been difficult and progress has been slow. Steel prices have been favourable for a number of months but there is no certainty as to how long those prices will continue. The annual “winter build” will require additional financing and the most likely source of financing is from the eventual owner of Algoma’s reorganized business.

“It is imperative for all parties involved in Algoma’s restructuring that negotiations progress and a consensual and sustainable restructuring be achieved. To that end, the Fourth DIP Amendment provides the necessary runway for Algoma, the Consenting Creditors and Algoma’s other stakeholders, including the Unions, to engage in constructive, meaningful negotiations to achieve the settlements that are necessary to implement the Recapitalization Transaction.

“The Recapitalization Transaction continues to represent Algoma’s best prospect to continue as a going concern enterprise to the benefit of all of Algoma’s stakeholders.”

In other matters, a motion by the City of Sault Ste. Marie asking the Court to order Algoma to pay approximately $13.9 million in back taxes has been denied. Judge Newbould said Algoma does not have to begin repayment of back taxes at this time but will start paying $350,000 per month going forward for city taxes. The amount was proposed by Algoma but is contingent on the company’s continued financial ability to do so.