ssar Global wants courts to reopen SISP

Essar Steel Algoma

Essar Global is making another pitch to the courts to reopen the sales and investment solicitation process and let them have a crack at continuing to own Sault Ste. Marie's steel mill.

A cross motion by Essar Capital Ltd. was filed with the Ontario Superior Court earlier this week. An expected Jan. 31 hearing date is to be rescheduled.

The motion material filed argues that almost a year has elapsed since the court approved the SISP order and it has not yet been completed.

The five-page document outlines the attempts during the past year which originally saw a joint bid between KPS Capital Partners LP and the term loan bidders fail when KPS withdrew in July 2016.

While the term loan bidders continued to move forward to complete the process on its own, it has failed to ink the deal as of yet.

The motion material argues that the Debitor In Possession (DIP) lenders “have repeatedly threatened and imposed artificial deadlines (which, failing to materialize, are then amended and extended). This has created a false sense of urgency and crisis.”

Another 60 days granted to extend the DIP financing moves the closing date to the end of of March.

“The sale transaction appears to be mired and the conditions precedent imposed by the term loan bidders appear incapable of satisfaction,” the motion reads. “A considerable amount of time and resources have been squandered pursuing solely the sale transaction to the exclusion of any other sale transaction or restructuring options.”

Essar Global Fund Ltd. argues that while the applicants have filed materials with the court suggesting liquidation of assets may be necessary, they are also ignoring the continued interest of EGFL.

An improvement in market conditions, steel prices and positive cash-flow operations have been reported in recent months through the court monitor.

“In light of the substantially changed market and company-specific circumstances since the commencement of the SISP, and in light of the continued interest of other parties in bidding, it is appropriate to reopen the SISP so as to allow these opportunities to be explored,” Essar Global urges. The documents note other stakeholders are also supportive of re-opening the SISP process.

A letter, sent by Essar Global to Ernst & Young Inc., reiterating the court motion and its interest in Essar Steel Algoma Inc.

It asks that the courts be advised of Essar Global's continued interest “in a possible acquisition of ESAI's assets and businesses, either alone or in partnership with others” and that it be provided with the information, documentation and ample time to participate in discussions and negotiations.

Essar Steel Algoma, which filed under the Companies' Creditors Arrangement Act for protection in the fall of 2015, is continuing its restructuring plan with an amended DIP financing and a stay extension until March 31, 2017.

The second extension was approved by the courts Jan 31.

That extension “approves extended borrowing for working capital requirements and other general corporate purposes and capital expenditures” and is not to exceed US $220 million.

At the time Essar Steel Algoma filed for CCAA protection, it argued that lowest ever steel prices, steel dumping, a decreased credit rating and issues with its iron ore pellet supply were the reasons cited for the need to file for the court protection.

Since that time, prices have rebounded, the iron ore pellet supply issue has been settled and the Canadian government is cognizant of the implications of steel dumping on North American markets and is taking measures to create a level playing field through the modernization of the trade remedy plan.