Two Bidders Contending for US Steel Canada

The Essar Group, parent company of Algoma, was prevented by the CCAA process from bidding on Algoma when it failed to show proof of financial resources to complete a purchase. At the time (May 2016), Essar Group was looking to liquidate holdings to reduce its $15 billion debt. It has since negotiated the sale of a 49 percent stake in Essar Oil to Russian energy company Rosneft for an undisclosed amount and completed the sale of Water’s Edge residential project in Bangalore for $73 million (490 crore).

“The way I’ve heard it is that Essar is a strategic buyer, and that would be best for Hamilton, but it’s all based on borrowed money,” said University of Toronto steel expert Peter Warrian in a comment to Hamilton Spectator. “When Essar acquired Algoma they just loaded it up with debt.”

KPS is a hedge fund that has a history of rebuilding distressed companies and selling them a few years later for a profit. Restoring US Steel Canada to health would be a positive but some sources are concerned about the company being owned by a hedge fund.

Any buyer of US Steel Canada will have to contend with the shortfall in the US Canada pension fund as well as US Steel’s debt claims of $2.2 billion.