KPS Abandons Bid for Essar Steel Algoma
Jul 14, 2016, 17:23 ET
With other bidders and/or restructuring proposals waiting in the wings, KPS departure provides opportunity to put restructuring back on track: Steelworkers
SAULT STE. MARIE, ON, July 14, 2016 /CNW/ - The United Steelworkers (USW) learned today that KPS Capital Partners (KPS) is withdrawing from the bid for Essar Steel Algoma Inc. ("Algoma") and that certain of Algoma's term lenders will be pursuing the bid independently. This is the latest twist in a mismanaged Sale and Investment Solicitation Process (SISP).
The process so far has ignored the advice of key stakeholders who have a functional veto over the restructuring, and prematurely excluded bidders. This flawed process lacked the bid tension needed to allow difficult decisions to be made in an informed way.
The USW will call for the process to take better account of the interests of key stakeholders in future.
"We know KPS. They are a top-notch fund run by recognized professionals," said Marty Warren, USW District 6 Director.
"The USW has been speaking with KPS for months. USW Local 2724 met with them twice, including one time where the entire local executive flew to Toronto. The USW Local 2251 executive met with them only a week ago." (USW Local 2251 represents hourly employees at Algoma's operations in Sault Ste. Marie, while Local 2724 represents salaried employees).
"The USW understands KPS could have brought a lot to the table," Warren said. "But what they bring comes at a very steep price for the workers. It is hard for a local union to recommend to its members that they pay such a high price when there are other serious bidders out there who appear to be offering materially better terms."
"Recommending our members make such a massive sacrifice becomes impossible when the sale process lacks any ability for the local union to test the different proposals against one another," added Tony DePaulo, Assistant to the USW District 6 Director.
"With such a flawed process, everyone starts doing their own thing. Unfortunately, that is what we are seeing now. I don't know what the company was thinking. I've been through lots of CCAA cases. I've never seen anything like this," DePaulo said.
With respect to the term lenders, Warren had this to say: "I'm not even sure if we know who the term lenders are. So far, the only faces that they have put forward are those of their financial advisors and lawyers and once this process is over those guys will be gone. It is hard to see what they can bring to the table besides money. All the bidders have that, and it seems that other bidders are prepared to leave more of it with the workers in Sault Ste. Marie."
Going forward, the USW would like the restructuring effort to be more responsive to the interests of key stakeholders and is considering bringing a motion to the court seeking relief to that effect.
"We are opposed to the SISP process and the way it has been handled to date," said Lisa Dale, President of USW Local 2724 at Algoma.
"With KPS withdrawing its bid, we now have the opportunity to put the restructuring back on track, with a process that truly addresses the interests of our members, our pensioners and our community," Dale said.
"There is still a lot of interest out there and a lot of goodwill among a number of stakeholders to get to a deal that has a reasonable possibility of closing. The Steelworkers are certainly willing to be involved," said Warren.
SOURCE United Steelworkers (USW)
For further information: Marty Warren, USW District 6 Director, 416-243-8792; Tony DePaulo, Assistant to USW District 6 Director, 905-869-0760, [email protected]; Lisa Dale, USW Local 2724 President, 705-254-2724, [email protected]; Bob Gallagher, USW Communications, 416-434-2221, [email protected]
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