Algoma Sales Process Will Not be Reopened

Essar Global was dismissed from bidding early on in the sales and investment solicitation process for failure to provide evidence of sufficient financial capability. KPS Capital, with the Term Lenders, was chosen as the successful bidder. KPS Capital withdrew after pressure from the union and Essar Global, but the Term Lenders continued to negotiate a deal for the company.

The union began negotiating terms with Ontario Steel although the company never formally submitted a bid. A letter from Essar Global, reprinted by SooToday on January 28, asked the CCAA Monitor to advise the Court of its interest in acquiring Essar Steel Algoma.

The letter was never received by the Monitor. Superior Court Judge Frank Newbould said in his decision that he found it “hard to give any bona fide credit to the letter” which was signed by an “indecipherable signature” and dated the same day it appeared in the local newspaper.

“If it truly was a letter from Essar Global and Essar Global was honestly trying to engage the Monitor, it was not any kind of way to do that.” Judge Newbould noted that it was the second time an unorthodox communication was put forth by Essar; Ontario Steel also sent its term sheet not to the Monitor but to the Globe and Mail.

Essar Global continues to show evidence of having financial problems, noted Judge Newbould. The company is being sued for more than $1 billion in damages by Essar Steel Minnesota as well as being the subject of a $560 million suit by a group of Indian banks.

“To re-open the SISP in these circumstances would be foolhardy,” said Newbould. “There is no evidence from Essar Capital of any viable bidder who can or is interested in being a bidder.”

Newbould also noted comments of John Strek, Senior Managing Director of CDG Group, LLC and Court-appointed Chief Restructuring Advisor for Essar Steel Algoma.

Said Newbould, “Mr. Strek is of the view that so long as Local 2251 thinks that Essar Global has a role to play in the restructuring proceedings, it is unlikely that it will engage in serious negotiations with the participating lenders who are behind the accepted bid. It is hard not to credit the CRA’s view.”

Newbould added, “Without any concrete evidence of Essar Global’s financial ability to make a bid, the notion that holding out for Essar Global to provide all the USW wants is fanciful.”