Politicians react to Essar Steel Algoma insolvency reports (update)

As published reports say Essar Steel Algoma plans to file for insolvency for the fourth time in the Sault steelmaker's history, the question of 'What can government do to help' has begun to surface.

“I am going to be talking with the people from Essar Steel to review the situation and find out where they are at and to offer any assistance, if they want it, from me,” said Terry Sheehan, MP-elect for Sault Ste. Marie.

The situation Sheehan referred to is Essar Steel Algoma's serious cash flow problems.

As reported earlier Thursday by SooToday, a Hamilton Spectator report quotes unnamed sources as stating the company plans on filing for insolvency.

Bloomberg Business quotes a Standard & Poor's analyst as saying the credit rating firm does not expect Essar Group to support Essar Steel financially this time around.

"We continue to feel that it will face a liquidity crisis and default on its debt obligations within six months without a sustained, near-term rebound in steel prices," said Jarret Bilous, of Standard & Poor's in the Bloomberg report.

Earlier this month, Standard & Poor's lowered Essar Steel Algoma's long term corporate credit rating from 'CCC+ to'CCC-' based on a continued decline in hot rolled steel and plate prices.

Reuters reported Monday the company has asked for advice from restructuring specialists Evercore Partners Inc and law firm Weil Gotshal & Manges LLP to help with debt restructuring.

The status of a $30 million federal loan for Essar Steel Algoma to help the plant modernize, announced by the Conservative government July 24, is unknown as the Liberals prepare to form a new government.

On that same day in July, the provincial government announced it was providing a $30 million grant for the plant to modernize.

"It's premature to speculate, I'm not going to comment on what might be rumours," said Sault MPP David Orazietti, referring to the reports from the Hamilton Spectator and Reuters.

"I've been assured by the company they would inform me as soon as possible of anything I need to be aware of.  That money ($30 million in provincial grant funding) does not flow until work is done and it is paid as work is being done…to date only a very, very small fraction of that funding has flowed for work that has been completed."

"If there are challenges moving forward our government will do everything that we're able to do to support the largest industry in our community," Orazietti said.

Sault Mayor Christian Provenzano's office told SooToday the mayor will wait for more facts to emerge before commenting.

100 workers were laid off by Essar Steel Algoma October 2.

The company has stated the layoffs were due to low demand for steel, low steel prices and dumped imports.

This would be the fourth insolvency for Essar Steel Algoma.

The company came out of court protection a year ago and, throughout its history, the steel plant has gone through two bankruptcies.

"Market conditions remain difficult and the Company has and will continue to respond," wrote Brenda Stenta, Essar Steel Algoma manager of corporate communications, in an email to SooToday Thursday.  

"This includes flexing our production and staffing levels with demand, and further curtailing costs. We are sensitive to the impact on our employees and we remain committed to mitigating further impacts."

"We value our community partners.  We regularly meet with our local government representatives and will continue to do so," Stenta wrote.

- with files from Kenneth Armstrong