Algoma getting closer to emerge from CCAA

It appears Algoma is taking its final steps to emerge from bankruptcy protection.

Court appointed monitor Brian Denega, in his Oct. 15 report, shows that Algoma is in the process of assigning the rights and obligations of Algoma and Algoma USA to the new company set to purchase the company.

The 10-page update to the court states that Algoma in the process of transferring its operating contracts between the former company and the new company and that most of its suppliers and service providers have agreed to transfer existing contracts to the new owners.

While the report suggests that there are still a few outstanding contacts where consent has not been provided, the company is continuing its efforts to obtain such consents. “The applicants reserve their rights to seek further orders regarding assignment of additional consent agreements if any difference with respect to assignment between the applicants and such counterparties cannot be resolved,” the monitor’s report reads.

Consents for the transfer of agreements from the former company to the new company have been worked on since Aug. 2, the reports states and most of the consents required have been received, Denega states in the report.

The larger requirements for the sale to proceed have already been completed. They include collective agreements with the unionized employees, a property tax payment agreement with the City of Sault Ste. Marie and agreements with the Port of Algoma along with a provincial decree releasing the new owner from pre-existing environmental liabilities.

The consents to assignment of various operational and supply agreements are usually one of the last items required to be completed before a company emerges from the Companies’ Creditors Arrangement Act proceedings.

Denega reports that it is his view “that the assignment of the outstanding agreements will enable the acquired business to transition seamlessly while operations continue without interruption.”

It’s also expected that agreements with the provincial and federal government also need to be finalized.

Last week, Ontario Premier Doug Ford was in Sault Ste. Marie pledging pension relief for Algoma.

“We’re 99 per cent there,” he had said at the press conference, and added that the agreement should be reached in a matter of weeks.

Details of any financial agreements were not disclosed.

Meanwhile, the monitor’s report also states that the financial advisors for the consenting creditors are in the process of soliciting proposals for exit financing to secure the best terms for the purchaser. It’s expected that the buyer will have sufficient liquidity upon the closing of the transaction and the buyer’s debt obligations will be significantly reduced compared to Algoma’s pre-filing indebtedness.

“The acquired business will be in a significantly improved financial position upon closing,” the report concludes.

Algoma’s restructuring will result in the continued employment of more than 2,500 people and bring stability to the steelmaker.

Denega also notes that the transaction will provide significant liquidity and rid of substantial amounts of the current debt of the business.

“The improved financial position will assist the buyer with achieving a long-term solution with pensioners, Algoma’s unions and governmental stakeholders at all levels,” the document reads.

Algoma, who has been in CCAA proceedings since November 2015, is hoping to emerge with a new owner before year end.