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Essar Steel Algoma term lenders, noteholders agree on recapitalization
By Caroline Salls
Pittsburgh, Sept. 23 – Essar Steel Algoma Inc. said a majority of its term lenders and senior secured noteholders have reached an agreement on a recapitalization proposal for the company.
According to a news release, the agreement calls for either a restructuring plan or the acquisition of substantially all of Essar Steel Algoma’s assets. In addition, the agreement provides for an up to $425 million investment, a reduction of the company’s funded debt by $1.15 billion and a reduction in annual cash interest expense by about $125 million, thereby providing improved liquidity and financial flexibility.
Essar Steel Algoma’s Companies’ Creditors Arrangement Act stay of proceedings was extended to Jan. 31 by the Ontario Superior Court of Justice.
In addition, the court approved an amendment and extension to the company’s existing debtor-in-possession financing facility. The DIP facility will mature on Jan. 31, and Essar will receive an additional $35 million of liquidity.
“We are very pleased to see an overwhelming majority of our secured lenders unifying to present a plan for the future of Algoma,” chief executive officer Kalyan Ghosh said in the release.
“This cooperation signals a collaborative approach and we look forward to working with them, the USW, the various levels of government, and all other stakeholders toward a final plan that achieves our shared goal of a stronger, more competitive Algoma.
“In the interim, the stay extension and the DIP amendment will provide the company with the stability required to continue operations, secure its winter raw material build and see this process through to a successful transaction.”
Essar Steel Algoma is based in Sault Ste. Marie, Ont., and manufactures hot and cold rolled steel products. The company filed for bankruptcy on Nov. 9, 2015 in the U.S. Bankruptcy Court for the District of Delaware under Chapter 15 case number 15-12271.
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