Essar Steel Minnesota Suing Essar Global

The Wall Street Journal reported that “these alleged actions ‘exacerbated ESML’s cash starved financial position’ and included transferring millions of dollars to affiliated companies not working on construction of the Minnesota mine, for ‘absolutely no value’ in return.”

According to the court filing, “ESML is left with a half-completed iron ore pellet plant that will cost hundreds of millions of dollars more to finish; and ESML is burdened with over a billion dollars in claims asserted against it that are directly attributable to the Essar affiliates’ failures to fulfill their obligations with respect to the project.”

Essar Steel Minnesota entered Chapter 11 reorganization in July 2016 after the governor of Minnesota terminated the company’s mineral leases for failure to pay its debts and complete the pellet plant. Governor Dayton agreed to lease the land to Cliffs Natural Resources. A month earlier, Cliffs Natural Resources negotiated a pellet supply agreement with ArcelorMittal depriving Essar Minnesota of one of its major customers.

ESML filed a motion requesting an investigation of Cliffs for violation of antitrust laws and accused the state of refusing to extend the repayment of grant funds because of lobbying efforts by Cliffs. The Essar motion stated, “It appears that as a result of Cliffs’ lobbying efforts and communications with State officials against the ESML project, the State of Minnesota determined it would not continue to work with the Debtors to allow them the time necessary [to] complete the Project.” The court hearing is scheduled for September.

In December 2016, the Delaware bankruptcy court approved a request for the company to change its name to Mesabi Metallics.

Attorneys for Essar Steel Minnesota said, “The debtors believe that this change will support a successful reorganization.” In addition the new name, said the attorneys, would “better distinguish ESML from the other Essar affiliates” in the case against Essar Global Fund.