HIGH-GRADE NI-CU-PT-PD-ZN-CR-AU-V-TI DISCOVERIES IN THE "RING OF FIRE"

NI 43-101 Update (September 2012): 11.1 Mt @ 1.68% Ni, 0.87% Cu, 0.89 gpt Pt and 3.09 gpt Pd and 0.18 gpt Au (Proven & Probable Reserves) / 8.9 Mt @ 1.10% Ni, 1.14% Cu, 1.16 gpt Pt and 3.49 gpt Pd and 0.30 gpt Au (Inferred Resource)

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Essar to ask for CCAA extension, more DIP money

posted on Sep 21, 2016 04:13PM

ttp://www.saultstar.com/2016/09/21/essar-to-ask-for-ccaa-extension-more-dip-money

Essar to ask for CCAA extension, more DIP money

By Elaine Della-Mattia, Sault Star

Wednesday, September 21, 2016 3:29:46 EDT PM

Essar Steel Algoma

Essar Steel Algoma will be asking the Superior Court of Justice to give them more time to secure a restructuring plan for the company.

A court motion will request that a stay under the CCAA until Jan. 31, 2017.

The motions, to be heard Friday, ask for a stay in proceedings and approve an amended debtor-in -possession loan (DIP) for the same time period.

Brenda Stenta, Essar Steel Algoma's manager of communications said the extensions are required to give the company sufficient liquidity for the winter raw material build and to maintain operations while the parts work towards a transaction and successful exit from CCAA.

The request is based on the grounds that Essar Steel Algoma is one of the largest integrated steel producers in Canada and is moving forward with its restructuring plans.

Court documents indicate that grievance claims procedures have been settled or arbitrated and the term lenders are still working with the steelmaker on an asset purchase agreement.

The documents also say that Essar Steel Algoma has been informed that Ontario Steel Inc., a company controlled by Essar Global Fund Ltd., the current ultimate parent of Algoma, intends on submitting a bid to purchase the business and assets but no such bid has been received.

Essar Steel Algoma is also continuing to explore other opportunities with potential bidders and stakeholders, the documents state.

The courts will hear that the applicants' cash flow projection will be stable to continue its operations through to Jan. 31, 2017 since an amended DIP financing arrangement has been reached between the parties. That arrangement must also be approved in the court process.

The amendment is needed because the original $200 million, has been exhausted, court documents state.

Of that amount, Essar Steel Algoma has fully drawn down the DIP Term Loan of $175 million and the remaining $25 million DIP revolver remains available with stringent conditions attached to it, court documents state.

The amended DIP financing is needed for Essar Steel Algoma to maintain its operations while they continue to pursue its restructuring efforts.

An affidavit of John Strek, senior managing director of CDG Group, the court-appointed chief restructuring officer, states that the term lenders are continuing to move forward with the purchase agreement and have met with the Province of Ontario, the City of Sault Ste. Marie and other government agencies

They are also continuing discussions with other stakeholders, including an ad hoc committee of Algoma senior secured noteholders and meeting with the unions.

He outlines the DIP financing arrangement and amendments that allow the steelmaker to continue with its operations and allows it to continue to pursue restructuring.

“Without continued DIP financing, the applicants will not be able to sustain operations over the winter,” Strek's affidavit states. “I do not believe that any creditor will suffer material prejudice if the DIP Amendment is approved and implemented.”

Meanwhile, a motion has also been filed by Portco Co., again asking the courts for an order that directs the steelmaker to make post-filing payments to the port and that it keep making its payments for services rendered.

An affidavit by Anshumali Dwivedi, CEO of the Port of Algoma, states that Essar Steel Algoma has accumulated significant arrears.

It's anticipated that by Oct. 17, 2016, Essar Steel Algoma will have surpassed the value of the noted owed by Portco to Algoma's parent company, a value of $19.8 million, “The only purported justification ever provided for the current non payment of Portco,” the document reads.

It is requesting its payment or wants the money owed to go to the note owed by Portco to Essar Steel Algoma's parent company.

The motion further requests that in the alternative, the court directs the payment by Essar Steel Algoma of the payments under the previously-signed Cargo Handling Agreement after Oct. 17, 2016.

A last resort request suggests the court declare that Portco is permitted to cease performing under the lease and cargo handling agreement and permits Portco to exercises its rights or remedies it sees fit.

Dwivedi said Essar's extension request doesn't worry Portco but the non-payment issue does.

“The DIP lenders are also the preferred bidders and their status as DIP lenders is being misused,” he said.

Sault Ste. Marie Mayor Christian Provenzano said the city was not surprised by the extension request. In fact, he expected it, he said.

“We've been approaching this and preparing for, a long drawn out matter. We never expected that it would resolve itself quickly,” he said in a telephone interview.

Provenzano said that he believes the city is still a priority creditor and confident it will be able to recover “some reasonable amount of the debt owed to us,” he said.

The city's low debt, good credit rating and conscientious spending habits have kept the city in good financial steed, he said.

“It's obviously difficult to have $20 million disappear from our cash flow but the city was in a healthy financial position, and still is, except for the fact we are facing some cash flow challenges,” he said.

The plan is to continue ensuring there is a reasonable cash flow and to hold the discretionary spending freeze moving forward.

Provenzano doesn't anticipate that the city will file another motion to obtain its current arrears tax money (post filing) due at this time.

He said that is a decision city council will have to decide in the near year once a new tax year has begun.

Meanwhile, The United Steelworkers announced that a framework agreement between the Ontario government and Bedrock Industries for the purchase and continued operations of U.S. Steel Canada facilities in Hamilton and Nanticoke has been reached.

“We are encouraged by the many aspects of the agreement announced today,” said Marty Warren, USW Ontario director.

He acknowledged that the province and Bedrock have made efforts to address the union's concerns and interested.

That agreement will see Bedrock purchase and continue operating U.S. Steel Canada's plants.

Bedrock is an industrial company building its production in metals.

“The deal announced today is far from perfect, given the challenges that arise from such a lengthy and complex insolvency process,” Warren said. “However, after two years in CCAA protection and after numerous discussions with other bidders,we believe this could lead to a good final deal for the union's members and retirees.”

Collective agreements with the unions still need to be negotiated and other matters resolved.