Essar Steel's growing woes: Now, the US subsidiary mandates advisers for debt restructuring
The company's US unit is in the final stages of building a $1.8 billion iron ore pellet plant in northern Minnesota
Essar Steel Minnesota LLC, a U.S. affiliate of India's shipping, natural resources and power conglomerate Essar Global Group, has hired financial and legal advisers to help it restructure its debt, according to people familiar with the matter.
The company is in the final stages of building a $1.8 billion iron ore pellet plant in northern Minnesota. Its woes underscore the impact that cheap Chinese imports have had on the price of iron ore and U.S. steel manufacturers.
Essar Steel Minnesota has hired investment bank Guggenheim Partners LLC and law firm White & Case LLP as debt restructuring advisers, the people said this week. Essar Steel Minnesota has about $1 billion in debt, one of the people added.
The sources asked not to be identified because the appointments are not public. Spokespeople for Essar Steel Minnesota, Essar Global, Guggenheim and White & Case did not respond to requests for comment.
Essar Steel Minnesota's move to restructure its debt comes less than six months after the bankruptcy filing of its Canadian sister company, steel manufacturer Essar Steel Algoma Inc. Essar Steel Algoma also filed for bankruptcy in 2014.
Essar Global moved into Minnesota in 2007, shortly after it acquired the Algoma manufacturer. At the time, the company said it was positioning itself to be close to high-value steel markets and sources of iron ore.
The plant, whose construction started in 2010, is scheduled to open this year, according to the company's website. It will permanently employ 350 people once it opens, according to the state.
Last year, Essar Steel Minnesota failed to make timely payments to its vendors, according to press statements from the office of the Minnesota governor. The company did not live up to the terms of the original agreement it had with the state, and at the end of last year it accepted a plan to repay Minnesota's $66 million loan.
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Post the announcement, GTL stock is trading higher by 11.27 percent at Rs 71.