Market Segment

Essar Steel Algoma to be Purchased by KPS Capital Partners
Written by Sandy Williams
June 19, 2016
Essar Steel Algoma announced today (June 17) that it has entered into an asset purchase agreement with KPS Capital Partners, LP. The sale is subject to approval by the Ontario Superior Court of Justice.
KPS, a leading private equity firm in the manufacturing sector, has a history of transforming challenged businesses into healthy, independent companies.
The transaction includes sale of substantially all of the Company’s assets to a consortium of bidders formed by KPS and the Company’s pre-petition term lenders. The bid includes cash, a credit bid equivalent of the term loan, and the assumption of certain liabilities. In addition to the court approval process, closing the transaction is subject to a number of conditions relating to employee and benefit matters including pension plans and collective agreements, capital projects, and environmental matters.
“We are pleased that we have reached this point in the CCAA process and look forward to exiting. The new company formed by the consortium will securely position New Algoma with a capital structure to sustain all phases of the steel cycle, “ said Kalyan Ghosh, President and CEO of Essar Steel Algoma. “We are also well within the timeline set out in our restructuring plan.”
The transaction is slated to close on or before August 31, 2016 and business will continue as usual in the interim.
The purchase by KPS leaves open the possibility of a potential merger with US Steel Canada, should KPS win the bid in that sales process.
Earlier this week, Essar Steel Algoma received an extension of its CCAA credit protection through September 16.
Superior Court Justice Frank Newbould also denied a motion by the City of Sault Ste. Marie that would have required the immediate payment of a $7.1 million property tax bill by Algoma.
“I realize that the city needs the money,” wrote Newbould. “But there are others who need money that are not being paid….such as the special catch-up payments on pension obligations and payments to the Port of Algoma.”
The court monitor for Essar Steel Algoma said that paying the tax bill would prevent it from maintaining the $20 million cash threshold required by the DIP Facility and necessary for maintaining the undisrupted operation of Algoma.
 
			    			
			    		Sandy Williams
Read more from Sandy WilliamsLatest in Market Segment
 
		                                Gerdau’s N. American earnings rise in Q3 due to fall in imports
Gerdau’s North American profits rose in the third quarter, boosted by a decline in imports due to Section 232 steel tariffs.
 
		                                Ternium swings to Q3 loss, eyes 2026 recovery
Ternium closed the third quarter with steady shipments and improving margins. But trade policy uncertainty and subdued demand in Mexico weighed on the Latin American steelmaker’s results.
 
		                                SMU Mill Order Index fell in September
SMU’s Mill Order Index declined in September after repeated gains from June through August. The shift came as service center shipping rates and inventories fell.
 
		                                Algoma’s losses widen in Q3 as tariff troubles continue
Algoma Steel’s net loss more than quadrupled in the third quarter on trade woes and its EAF transition. Separately, the company announced a change in leadership, as CEO Michael Garcia will retire at the end of the year.
 
		                                Cliffs, POSCO announce MoU for ‘transformative’ partnership
Cleveland-Cliffs on Thursday said it had signed a memorandum of understanding (MoU) with POSCO to forge a strategic partnership, one Cliffs bills as "transformative."
