http://www.saultstar.com/2017/08/24/protocol-inked-for-maga-due-diligence-protocol

A protocol has been established that will give MAGA the information it needs to finalize a proposal that it could use to try to purchase Algoma.

MAGA – Make Algoma Great Again – is in the process of trying to enter the Sales and Investment Solicitation Process (SISP) to purchase the Sault Ste. Marie steelmaker. That has not yet been permitted by the courts overseeing the process.

The most recent monitor’s report penned by Brian Denega states a protocol agreement has been established between MAGA, USW and the consenting creditors that will facilitate reasonable due diligence in order for MAGA to submit an improved proposal.

As a result of the agreement, a former motion for an order granting MAGA access to Algoma’s information has been withdrawn from the courts.

A deadline of Sept. 8 has been set for MAGA’s revised proposal to be submitted to the creditors, applicants and the monitor.

The due diligence protocol allows MAGA to tour and inspect the steel mill and receive management presentations on the company.

MAGA has also been given the go-ahead to consult with key management on issues and receive business plan and financial statement information in accordance with a non-disclosure agreement.

The information gathering sessions expire on Sept. 8 when a revised offer to the consenting creditors is due, the due diligence protocol states.

The protocol was established as a result of a motion filed asking a judge overseeing the restructuring of Algoma to direct the applicants and the monitor to facilitate due diligence on MAGA and its financial backers and hold a case conference to discuss – and potentially approve – the purchase of the steelmaker by MAGA under the SISP process.

The Sault Star has learned that as a result of the protocol agreement reached between the parties earlier this month, MAGA representatives have recently toured the plant and received briefings and financial information from Algoma management and its creditors.

MAGA has argued that it has the resources to restore operations and stability to Algoma but allowing the business to emerge as part of an integrated enterprise through which it can acquire metallurgical coal, coke and iron ore on favourable terms, saving the steelmaker money on the raw materials it needs to operate.

If MAGA is not permitted to formally enter the process, it is free to produce a proposal to the creditors and the company and it would be up to those parties to determine whether it will be accepted.

That proposal could range anywhere from full outright purchase to that of an equity holder with partial ownership, defined with specific governance and financial agreements.

Its previous offer, filed with the courts but with detailed financial information heavily redacted, is said to have fallen short on money owed to the creditors, sources told The Sault Star.

Term lenders who want to purchase the steel mill believe they have the money to invest in the plant and a plan that will see major capital infrastructure completed and convert debt into equity to make the mill viable in the long term.

Mayor Christian Provenzano said that a recent conditional agreement reached between the municipality and the term lenders who want to buy Algoma, regarding the repayment of outstanding taxes, do not include MAGA.

Provenzano has said that the municipality will only negotiate with parties approved by the courts and MAGA is not in that position.

“Our agreement is with the term lenders and term lenders alone,” he said.

It’s unknown how that conditional agreement will be impacted if MAGA is permitted into the process.

Meanwhile, Anshumali Dwivedi, executive director of the Port of Algoma, said Portco is still not receiving any payments from its agreement with Essar Steel.

“We believe they are using the courts to delay the payments they don’t want to make,” Dwivedi said. “We are being held hostage through the courts.”

An appeal hearing was held over several days earlier this month focusing on Justice Frank Newbould’s March decision that gave Algoma the ability to cancel its contract after the $150 million is repaid to Portco and the collateral damage that arose out of that decision. A ruling on that appeal isn’t expected for weeks.

Portco and its lender GIP Primus LP are expected to head back to court to once again try to have cargo payments resume for services rendered.

Dwivedi said Portco is fortunate that new business is increasing through other avenues and companies. To date this season eight shipments have arrived at the port and another is expected next week, keeping local operations afloat.

He said that the empty vessels are being utilized by Algoma to transport materials, including sludge, elsewhere, ultimately reducing their costs to operate.

“So synergies are being created as a result of the Port that are also helping Algoma with their operational costs,” Dwivedi said.

Provenzano said the city has advanced the argument with the term lenders that Portco and a community port is important to the economic diversification efforts of Sault Ste. Marie.

“The city has communicated the importance of the Port of Algoma to and we’re asking for cooperation by them and we’re confident we will get support from the term lenders,” Provenzano said.

The court documents suggest it is time for Algoma to emerge from CCAA protection but agreements with the unions have not yet been finalized.

Sources say that if agreements are reached with the union, the company could emerge from CCAA protection by Nov. 1.

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

Since then, 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.