Bloomberg News is reporting that Essar Steel Algoma may be heading for restructuring later this month.
The publication reported that KKR & Co. and two other investors have purchased debt in the struggling Sault Ste. Marie steel maker, which has lost money in nine consecutive quarters.
The Northern Ontario manufacturer of plate and sheet steel has been labelled “high risk” by Standard & Poor’s.
The company reportedly skipped a June interest payment on its $384.7 million of 9.875 per cent bonds due next June, which could trigger a default within 30 days if gone unpaid.
Bloomberg reports that KKR, Bain Capital LLC’s debt-investing group Sankaty Advisors LLC and Loomis Sayles & Co. have taken positions in those securities.
In mid-June, Essar Steel Algoma stated it had entered into confidential refinancing and recapitalization with investors on 70 per cent of seventy per cent of those unsecured notes.
Last December, the Ontario government approved a special regulation providing funding relief for the company’s pension obligations. The pension contribution requirements have more than doubled every year and were rising to the levels that the company deemed unsustainable.
Formerly known as Algoma Steel, the plant was purchased by India’s Essar Group in 2007. After emerging from bankruptcy protection in 2002, the company went from industry whipping boy to become one of the most efficient and profitable steelmakers in North America by the middle of the decade.