Sault Ste. Marie’s Port of Algoma is insolvent and has no operating management, a Toronto judge claimed Oct. 17.
Justice Frank Newbould of Ontario's Superior Court made the remark as he rejected a second application by Port of Algoma Inc. to get Essar Steel Algoma to pay for cargo handling services rendered since the Sault steelmaker filed one year ago for insolvency protection.
"There is no management or direction given by [Port of Algoma] to [Essar Steel Algoma]," the judge said in his written decision. "[Port of Algoma] has no operating management at all. It is insolvent."
Judge Newbould said that the port was just improperly raising the same argument it tried unsuccessfully to use on him in a similar application back in June.
"[The port] raises the same argument again. It is not open to [the port] to do so. It has been decided against [the port] and there was no appeal from that decision. In any event, I am not persuaded that anything has changed regarding how the port is operated."
Port of Algoma Inc. was created as a separate business entity in September 2014, when Essar Steel Algoma Inc. spun off its aging Sault dock as part of a restructuring deal.
The port is 99 per cent owned by Essar Ports, a subsidiary of Essar Steel Algoma's parent company, Essar Global Fund Ltd. The remaining one per cent is owned by the City of Sault Ste. Marie.
Port of Algoma says it's entitled to be paid because it provides cargo handling services to Essar Algoma on the port property.
But the port work is actually done by Essar Algoma workers. The port claims to manage and direct the port staff.
"That is not what the evidence is," Judge Newbould said on Oct. 14.
Concern was expressed in the courtroom about an unpaid US$20 million promissory note issued by the port to Essar Steel Algoma that was later assigned to the Indian-based parent company, Essar Global Fund Ltd.
On September 26, Judge Newbould directed a court-appointed monitor to commence oppression proceedings by October 21 under the Canada Business Corporations Act, related to the Port of Algoma transaction.
Newbould ruled that it would be premature to order Essar Algoma to pay the port for cargo handling until the oppression proceedings are decided.
"Not a whole lot has changed although the amount of payments not made to [Port of Algoma] is approaching the amount of the unpaid [port] promissory note," the judge said.
"[Port of Algoma] however says that the parties have not quickly conferred as to the most appropriate way to deal with the set-off or other issues and that it is now entitled to raise all of the issues that it raised on its first motion. It blames the other side for the delay. "I cannot say that [Essar Algoma], the monitor or the debtor-in-possession lenders have let things slide," the judge said.
The port argued before Judge Newbould that if it's not entitled to be paid under the cargo handling agreement, then it should be allowed to cease operations at the port and be relieved from its performance obligations to Essar Steel Algoma. "I would not make such orders," the judge responded.
"To permit [Port of Algoma] to effectively shut down the operations of [Essar Steel Algoma] would be completely contrary to the interests of all stakeholders, not the least of which are the employees and retirees, none of whom have supported the position of [the port] on this motion.
"Such an order would have the effect of giving [the port] complete control of this entire proceeding. That may be the wishes of its Essar parent who has in the past indicated an interest in acquiring all the assets in the Companies' Creditors Arrangement Act sales process."
"It is not in the interests of the majority of all the shareholders," the judge said. "As well, [Port of Algoma] has said it has no money and whatever it receives from [Essar Steel Algoma] under the cargo handling agreement has gone straight to its lender GIP Primus.
In those circumstances nothing would be achieved for [the port] in being able to stop [Essar Steel Algoma] personnel from operating the [port] facilities.
"We are dealing with attempts to have a debtor, in this case [Essar Steel Algoma], survive to see another day under a new owner," Newbould said.
"There must be choices made as to who gets paid and who does not. As the monitor says, these are often tough choices but a balance must be made between the debtor and its stakeholders and the party claiming payment."
Notwithstanding Judge Newbould's claim that Port of Algoma has no operating management, Chief Executive Officer Anshumali Dwivedi was seen Oct. 14 at an announcement at Algoma University by Navdeep Bains, the federal minister of innovation, science and economic development.
