Home >companies >Essar Steel Algoma concludes $1.4 billion recap & refinance

London: Essar Steel Algoma Inc., the Canadian subsidiary of the Ruia-owned Essar Steel Ltd, on Tuesday said it has successfully completed the $1.4 billion recapitalisation and refinancing process.

Algoma successfully raised a total of over $1.2 billion which includes equity of $466 million, cash, preference shares and proceeds from the sale of port assets. The refinancing also includes debt of $750 million comprised a term loan ($375 million) and senior secured notes ($375 million), exchanged junior secured notes for $252 million is also a part of it, the company said, adding that a new revolver with $50 million of availability for liquidity rounds out the financing package.

The resulting impact on the company’s balance sheet is a deleveraging of more than $200 million and an approximate $47 million reduction in annual cash interest expense, it added.

Essar Steel Algoma chief operating officer (CEO) Kalyan Ghosh said, “Through the concerted efforts of our management team and our 2,800 employees, in combination with the support of key stakeholders including our 6,300 pensioners and our union locals, we have addressed our pension structure to ensure ongoing manageability. We have also renegotiated our raw material supply contract at competitive market prices, and made step changes in both our productivity and conversion costs, positioning us in the best quartile in North America as a low cost, high quality steel producer."

The company is operating near full capacity and generating strong quarterly EBITDA, he said, adding that the company is now soundly positioned for strategic reinvestment in optimisation and growth opportunities.

On the development, Prashant Ruia, chairman, Essar Capital Ltd said: “As we have demonstrated since the acquisition in 2007, we remain committed to Algoma. Algoma is Essar’s cornerstone asset in the North American marketplace and with this investment it is now poised for growth. We are proud to continue Algoma’s steelmaking tradition as one of Canada’s leading manufacturers."

The company on Tuesday also delivered notice that it has called for redemption of all its outstanding 9.375% senior secured notes due 2015.

Redemption of such notes is expected to occur on 15 December, 2014. Essar Steel Algoma is based in Sault Ste Marie, Ontario. As a fully integrated steel producer, Algoma derives its revenues primarily from the manufacture and sale of hot and cold rolled steel products including sheet and plate.

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