Essar Steel re-sizes $624 million two-part notes offering, sets talk

By Paul A. Harris

Portland, Ore., Nov. 6 – Essar Steel Algoma Inc. released final price talk for a revamped and slightly downsized $624 million two-part offering of secured notes, according to a market source.

An upsized $375 million tranche of five-year senior secured notes (Ba3/B+), which come with two years of call protection, is talked to price at a discount to yield in the 9˝% area. The tranche was upsized from $350 million.

A downsized $249 million tranche of seven-year junior secured notes (B3/B-), which come with three years of call protection, is talked at 14% with a PIK option at the issuer’s discretion. The junior secured notes have been spoken for by the company’s existing unsecured noteholders, according to the source. The tranche was downsized from $275 million.

Books close at noon ET on Friday.

The overall deal size was originally in the market at $625 million and thus is downsized by $1 million.

Deutsche Bank Securities Inc. is the left bookrunner for the Rule 144A and Regulation S for life offering. Goldman Sachs & Co. and Jefferies LLC are the joint bookrunners. Imperial Capital and Canaccord are the co-managers.

The senior secured notes feature a 25% equity clawback during the non-call period. The clawback was reduced from 40%.

Proceeds, in addition to proceeds from a $375 million term loan, will be used to refinance debt and for general corporate purposes.

The prospective issuer is a Sault Ste. Marie, Ont.-based manufacturer of hot and cold rolled steel products.

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