The Minnesota sister company of bankrupt Essar Steel Algoma appears to be heading down the same path as its Ontario counterpart.
Reuters reported that Essar Steel Minnesota LLC, a U.S. affiliate of the Essar Global Group, has hired financial and legal advisers to help it restructure its debt.
The international shipping, natural resources and power conglomerate is edging toward completion of a controversial US$1.8 billion iron ore pellet plant at Nashwauk in northern Minnesota.
Sources told Reuters that Essar Steel Minnesota has hired Guggenheim Partners LLC and the legal firm of White & Case LLP to restructure its $1 billion debt.
Essar Steel Minnesota's move comes less than six months after Essar Steel Algoma in Sault Ste. Marie filed for bankruptcy in the U.S. and creditor protection in Canada.
Essar Global arrived in Minnesota in 2007, shortly after it acquired Algoma Steel.
Construction of the taconite pellet plant started in 2010 and was scheduled to open later this year, employing 350 people. This plant is positioned to eventually feed pellets to the Sault steel mill.
Rest assured said Essar Steel Algoma spokeswoman Brenda Stenta, the Sault steelmaker’s source of taconite is safe and sound.
“I can’t comment on behalf of other corporate entities however I can confirm our near-term supply of iron ore is secure and we are in the process of finalizing long term supply agreements,’ she said by email.
Essar Algoma has been temporarily sourcing pellets from U.S. Steel on the nearby Mesabi Range in northern Minnesota until the Minnesota taconite mill becomes operational.
Late last fall, the Sault plant was forced to buy from U.S. Steel after its traditional supplier, Cliffs Natural Resources, terminated its agreement with Essar in October, accusing Essar of breach of contract.
Essar Steel Minnesota’s Nashwauk project has been dogged by bad press due to the company’s failure to make prompt payments to its construction vendors.
It forced Minnesota governor Mark Dayton to step in and demand that Essar repay a $66-million state loan applied as a subsidy for a proposed taconite processing plant and steel mill in Nashwauk.
The global downturn in iron ore and the steel industry caused Essar to abandon plans for the steel mill, but Essar Steel Minnesota has agreed to repay the loan in 16 quarterly payments starting in March 2017.
Meanwhile, the lenders for Essar Steel have invited two other Indian steel producers, Tata Group and JSW Group, to come in and kick the tires.
