Skip to content

Court renders decision on Essar Algoma

Superior Court Justice Glenn A. Hainey approved an extension of Algoma's debtor-in-possession financing to March 21, 2018
0
20160603 Essar Steel Algoma KA 04
FILE PHOTO: Essar Steel Algoma Kenneth Armstrong/SooToday

After keeping its head above water for 11 weeks without debtor-in-possession financing, Essar Steel Algoma is once again covered by an interim lending arrangement intended to see it through its winter build.

In a Toronto courtroom on July 17, Superior Court Justice Glenn A. Hainey approved an extension of Algoma's DIP financing to March 21, 2018.

The steelmaker asked for resumption of its lending arrangement to cover the annual cost of replenishing its raw material inventory stocks after the reopening of the Great Lakes shipping season.

Algoma's original DIP arrangement expired April 30.

The company shopped for alternative lenders but opted to stick with a group of original term lenders, represented by Deutsche Bank, who've kept the steel mill operating for the past 20 months.

One of the DIP bids was from a competitor in the North American steel industry.

Concerned that this bidder might gain access to commercially sensitive information, Algoma decided to stick with lenders who aren't direct competitors.

The new DIP arrangement allows the Sault steelmaker to borrow up to US$175 million to finance its working capital requirements and other general corporate purposes and capital expenditures.

Weekly court-ordered "cash sweeps" payable to the DIP lenders will continue.

Whenever the steel mill's unrestricted cash exceeds US$25 million at the end of any Friday, it must "sweep" the excess to the DIP lenders.

The weekly sweeps will be suspended, however, from Oct. 1, 2017 through Jan. 31, 2018.

Algoma must keep its operating expenses within 15 per cent of its approved budget

The DIP lenders will receive an extension fee of US$3.9 million.


David Helwig

About the Author: David Helwig

David Helwig's journalism career spans six decades beginning in the 1960s. His work has been recognized with national and international awards.
Read more >


More Sault Ste. Marie