SAULT STE. MARIE, ON, July 24, 2014 /CNW/ - Essar Steel Algoma Inc. ("Algoma") announced today that it has finalized the terms of its support
agreement and corresponding equity commitment with the investment fund
that is the ultimate owner of Algoma, Essar Global Fund Limited ("EGFL"), and holders (the "Ad Hoc Noteholder Committee") of more than 70% in principal amount of its 9.875% senior unsecured
notes (the "Notes").
This agreement provides Algoma with a near-term capital infusion from
EGFL of up to US$100 million with the first US$25 million installment
payable within five business days. This cash infusion will ensure the
appropriate liquidity required to complete scheduled capital
improvements and allows for the seasonal raw material build. The
agreement provides for a total equity infusion from EGFL of up to
US$300 million concurrent with the refinancing of all of Algoma's
senior secured debt, which will substantially deleverage Algoma's
balance sheet and reduce financing costs. In lieu of full repayment of
the Notes, holders of the Notes will receive a cash payment equal to
32.5% of the amounts owing on the Notes plus a restructured, non-cash
pay junior lien instrument equal to 55% of the amounts owing on the
Notes, subject to certain call rights. The transaction is subject to,
among other things, the execution of definitive documentation,
completion of the consensual processes under the Canada Business
Corporations Act, and will be completed on or before November 15, 2014.
"This agreement provides for a comprehensive capital infusion, a
substantial deleveraging of our balance sheet and the refinancing of
all of Algoma's senior secured debt. Our summary financial projections
show EBITDA in the region of US$300 million and cumulative unlevered
free cash flows of over US$700 million between FY2015 and FY2019 based
on market pricing inputs under the new iron ore pricing contract. When
combined with our strong business fundamentals, best quartile cost
position and US$90 per ton run-rate EBITDA, Algoma is strongly
positioned with the financial flexibility for the future" said Kalyan
Ghosh, Chief Executive Officer of Algoma.
Further information regarding the details of the Plan of Arrangement and
the related voting process will be outlined in the Management Proxy
Circular, which will be distributed to unsecured noteholders and posted
to Algoma's website. The Noticing Agent, Donlin Recano has also
established a webpage at www.donlinrecano.com/essarsteelcanada and www.donlinrecano.com/essarsteelus where further documentation related to the process can be found.
The Blackstone Group, Kirkland & Ellis LLP, and Stikeman Elliott LLP
represent Algoma as financial advisor and outside legal counsel,
respectively. The Ad Hoc Noteholder Committee is represented by
Lazard, Paul Weiss, Rifkind, Wharton & Garrison LLP, and Goodmans LLP.
This release is not an offer to sell or an offer to buy any securities.
This news release includes forward-looking statements. All statements,
other than statements of historical facts, identified by words such as
"assumes", "plans", "expects", "believes", "projects", "aims",
"estimates", "anticipates" and "will", are forward-looking statements.
The forward-looking statements provided in this news release are based
on management's current belief, based on currently available
information, as to the outcome and timing of future events.
The transactions noted herein are subject to closing conditions.
ABOUT ESSAR STEEL ALGOMA INC.: Essar Steel Algoma Inc. 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.
ABOUT ESSAR GLOBAL FUND LIMITED: Essar Global Fund Limited ("EGFL") is an investment fund managed by its investment manager, Essar
Capital Limited. EGFL is a global investor, controlling a number of
world-class assets diversified across the core sectors of Energy,
Metals & Mining, Infrastructure (comprising ports and EPC businesses),
and Services (primarily comprising shipping and BPO businesses). The
aggregated revenues of the Fund's portfolio companies total US$35
billion. The Fund's portfolio companies employ over 73,000 people
across 29 countries, and have adopted international standards of
health, safety, environmental protection, and corporate governance.
SOURCE: Essar Steel Algoma Inc.
For further information:
Manager Corporate Communications
Financial Advisor, Blackstone