Essar Steel Algoma, the Canadian subsidiary of steel major, Essar Steel has completed a comprehensive recapitalisation and refinancing process.
According to an Essar statement, Algoma successfully raised over US$ 1.2 billion, which includes equity of US$ 466 million, cash, preference shares and the proceeds from the sale of port assets. The refinancing also included debt of US$ 750 million, which comprised a term loan of US$ 375 million and senior secured notes of US$ 375 million.
Essar said exchanged junior secured notes of US$ 252 million was also a part of the package. “In addition, a new revolver with US$ 50 million of availability for liquidity rounds out the financing package,’’ the statement said.
The impact to the company’s balance sheet as a result is a deleveraging of more than US$ 200 million and about US$ 47 million reduction in annual cash interest expense.
“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, 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,’’ Kalyan Ghosh, Essar Steel Algoma CEO, Kalyan Ghosh said in a statement.
He said the company was operating at near fully capacity and generating strong quarterly operating profit in the order of over Canadian dollar 85 million. The company also delivered notice that it has called for redemption of all of its outstanding 9.375 per cent senior secured notes due 2015. Redemption of such notes is expected to occur on December 15, 2014.
“As we have demonstrated since the acquisition in 2007, we remain committed to Algoma,’’ Prashant Ruia, Chairman, Essar Capital said in a statement. “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.’’
