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Essar Steel Algoma increases its borrowing

Thursday, December 12, 2013   by: SooToday.com Staff

NEWS RELEASE

ESSAR STEEL ALGOMA

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Essar Steel Algoma confirms amendment to asset-based lending term loan

SAULT STE. MARIE - Essar Steel Algoma Inc. confirmed today that the Company's lenders have approved an amendment to the borrowing base available under its Asset-Based Lending Term Loan allowing for a $24 million USD improvement in cash availability.  

The amendment became effective December 11, 2013.

Kalyan Ghosh, chief executive officer, commented on the amendment: "Management continues to take steps towards ensuring the essential seasonal raw material inventory build to achieve its targeted production levels and capitalize on the current steel market. When combined with the $25 million USD loan agreement which closed December 6, 2013, the increased borrowing base aids in positioning the Company on this path."

Essar Steel Algoma Inc. is based in Sault Ste. Marie, Ontario. 

Revenues are derived primarily from the manufacture and sale of rolled steel products, including hot and cold rolled sheet and plate.

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Comments
27
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Note: Comments that appear on the site are not the opinion of SooToday.com. Keep discussions civil and on topic. Refrain from obscenity and don't post anything that your grandmother would be ashamed to read. Those who do not abide by these guidelines will have their membership revoked without notice. If you see an abusive post, please click the link beside the post to report it.
jojo12345 12/12/2013 2:04:34 PM Report

when you need to borrow to make a business run it is not looking good
my70monaco 12/12/2013 2:29:25 PM Report

I heard from a recently retired Essar employee that Essar split the co-gen power plant from under Essar Algoma's umbrella and created a separate company. Why? So the 6 to 8 million dollars a month it generated went to Essar's owner's pockets instead of Essar Algoma's cashflow. I don't know if this info is factual or not but it sounds like something they would pull off. Can anybody verify this info?
bounder 12/12/2013 2:30:37 PM Report

When you need to shut a business down , borrow borrow, then claim bankrupt ,seek protection in court like before , deja vu.
Slim Shady 12/12/2013 2:51:12 PM Report

@my70monaco

Yes that is true. Essar Steel Algoma Inc. (ESAI) sold it's 50% share in the Cogeneration Plant to Essar Power Generation (EPG) so that they now own 100%. This was done about 2-3 years ago.

Why did they do this? Answer: Business strategy. Essar owns both companies so it still gets 100% of the profits, but since they are separate legal entities EPG is shielded should anything happen (like a bankruptcy) to ESAI. As you know, in a bankruptcy all the assets can be sold to pay of creditors. The Cogen is a cash cow so to speak and is recession proof. The odds of EPG going bankrupt is slim to none.

Unfortunately the workers did not get any consideration in profit sharing in either the first couple years of operating profits or the profit from its sale -despite being entitled too. I do think that this is still be battled in the arbitration courts.

@ jojo12345

Companies borrow capital all the time, this is no different. The markets are currently soft and ESAI is paying much more for iron ore that the open market. This puts them at an uncompetitive disadvantage. In January they are eligible to purchase iron ore at new, much lower rates and this should help them significantly. They are trying to maintain their financial stability until then instead of laying off people and canceling orders.
Outside Observer 12/12/2013 3:26:31 PM Report

Having the right leverage ratio is actually beneficial in the operation of a business. Can't say what that level is for Essar, but they have a smart management team and accountants who can. This is probably a positive thing, not negative.
steelworker 12/12/2013 3:56:29 PM Report

They haven't even started stockpiling iron ore pellets for the winter months.
thesharr 12/12/2013 6:47:40 PM Report

Where's Orazetti now or when the cogen sold.The cogen was supposed to be run for ten years giving Algoma Steel A break on power to strengthen their bottom line.The cogen's excess power would go to the grid.It barely got off it's feet and Bam sold to Essar Power,what happened to the ten year agreement with the government,what happened with the cogen being part of Algoma Steel at the time,Instead they srewed us the workers by making it a separate entity,then they sold it to Essar Power but we man it and still do.This was a smoke and mirror ploy by the upper management,Turcotte,Plastino,only to name a few it's been so long I can't remember who screwed us the most.
Wisenheimer 12/12/2013 6:48:32 PM Report

Lots of time to ship ore down from Tilden. With global warming upon us the ice won't freeze up til ... Oh Crap!
Wisenheimer 12/12/2013 6:55:02 PM Report

thesharr .. your greedy union and it's inability to understand what business needs to prosper. Be happy that Essar perseveres. The alternative will have steelworkers headed to Northern Alberta.
steelworker 12/12/2013 7:06:04 PM Report

Not this steelworker. I'll get a government grant and start up a meth lab. Just can't wait for my photo-op with David O. as small business owner of the year.
thesharr 12/12/2013 7:24:07 PM Report

Wisenheimer,wow either they brainwashed you or your one of them. They lined their pockets when Essar purchased Algoma and maybe a little insider trading,but that's something our greedy union wouldn't know about because we do things that better all members not just the select few.
kadynce 12/12/2013 7:58:26 PM Report

Can you say layoffs comming in the near future
20081915 12/12/2013 8:35:05 PM Report

Essar pay your bills. You are making people suffer.
boilertyme 12/12/2013 9:07:06 PM Report

Essar takes care of Essar , our community means nothing to them , our future means nothing , they would have their employees working barefoot 16 hours a day for a bowl of rice and still feel they are owed.
gr84u 12/12/2013 9:32:53 PM Report

What I would like to know is this: the co-gen is on Essar Steel property, the co-gen is manned by Essar Steel employees, the co-gen is repaired and maintained by Essar Steel employees, the co-gen uses Essar Steel biproducts (blastfurnace, steelmaking, cokemaking waste gasses, praxair air ect...) to run its operation and generate a percentage of it's energy, the co-gen is cleaned by Essar Steel janitors, the co-gen is accessed by roads that are maintained by Essar Steel equipment and manpower, you get the idea...the list goes on and on.
The question in all this is, is the co-gen that is now owned by Essar Energy running at $0 cost and $100% prifit and Essar Steel stuck paying all the operations and maintenance costs?? Are they not even paying to operate the co-gen on Essar Steel property? If this is in fact the case then I would like to know who orchestrated this business deal so maybe I can get some tips from them on how to live expence and rent free while pulling in $100s of millions of dollars a year!

itsme29 12/12/2013 9:48:32 PM Report

gr84u


and it that same cogen was paid for by a gov grant.... your welcolme essar...

thieves
Wisenheimer 12/12/2013 10:27:57 PM Report

Just be damned grateful you have one of the highest paying manufacturing jobs in the province. Take care of it and you might wind up with a pension. The days of bailouts at that plant are long gone.
gr84u 12/12/2013 11:41:07 PM Report

@wisenheimer

You are definite Essar management! No denial of truthfull statements against theivery and underhanded manoeuvres against the work force and city, just the same old arrogant mentality associated with management culture, your station and lack of a sense of morality. We are not "lucky to have a job and possible pension", you are lucky we are not in another country where lynching a known criminal is overlooked!
jojo12345 12/13/2013 1:00:15 AM Report

if you will go in their country and do this..they will shoot you
Lyne G 12/13/2013 6:35:08 AM Report

Essar should start by looking at reducing its workforce cost by stopping a very costly practice. A number of workers breeze through their shifts and let things get behind. At that point they stay overtime without even being asked to do so and collecting huge pay cheques on a regular basis.
If they stop this costly practice, they would save a huge amount and productivity would go up as those workers would have to do their job on their regular paid time.
If a worker stays to do an overtime shift without even been asked, they should not get paid for that shift at all...that would stop this practice dead in its tracks.
Slim Shady 12/13/2013 7:49:09 AM Report


@ gr84u

Even though EPG is on our property, the physical foot print of the mill is on it's own surveyed plot with easements on title for access (just like the Tube Mill). All man-hours and materials, repairs etc. are billed to EPG in SAP via a separate fund centre, so they do pay for its operation.

@Wisenheimer

It has nothing to do with greed. The unions have a profit sharing contract that included all ESAI operations. At the time the Cogen was 50% owned by ESAI and 50% of their operating profits went to them. It added to ESAI�s bottom line and corresponding EBITDA margins. Hence the Unions were entitled to a portion of the profits. If you sell an asset for a profit, it is a taxable income (Capital Gains) also showing on your yearly EBITDA margins.

Your bitterness towards other people who are hard working just because they are unionized and you are not is irrelevant. Not every worker is lazy or over paid; please do not paint everyone with the same brush.

@ steelworker

LMAO. You and me both. I�ll help you with the cook!
Wisenheimer 12/13/2013 8:23:04 AM Report

I was unionized at ALgoma Steel, and ASC and ASI and Essar Algoma for 30 years.
You can educate me on nothing that went on. Best way to destroy a good worker was 3 months in 2251 or 5595. The Soo won a lottery when Essar bought in. Workers at Dofasco, Stelco, St.Marys wish they had time machines.
Dead End Kid 12/13/2013 10:55:47 AM Report

When the company makes money so does the worker and it's the same the other way around. Maybe you would rather work in India for a 50 cents an hour. You should be thankful that your life was richer because your union negotiated fair contracts for you during your thirty years at Algoma. Did they twist your arm to make you go there?
edo 12/13/2013 11:20:33 AM Report

Yes Essar ,they did a great job with Dofasco didn't they!!!!!Yes borrow to line their pockets.Wake up people since 1982,recession hit ,free trade .The steel industry is done in canada.These clowns from india,are just playing with you .Wake up sault ste marie!!!!.If you don't ,then let me say "GET THAT INTO YAH"
crashed13 12/13/2013 1:17:59 PM Report

borrow to the hilt then when it hits the fan retreat to Pakistan where no one can get to you.
jojo12345 12/14/2013 3:44:15 AM Report

bigger company then essar did close
judoka 12/14/2013 11:50:44 AM Report

Don't work at essar, however it seems pretty apparent ( not just from these comments ), that a few facts seem to be pretty obvious...( 1 ) Essar is having a hard time with the plant....( 2 ) They do not have a reputation for taking care of their people...... ( 3 ) the government has put quite a bit of money into the plant. Unfortunately at the end of the day, this may not make a big difference.
Comments
27
Please sign in to post a response
Note: Comments that appear on the site are not the opinion of SooToday.com. Keep discussions civil and on topic. Refrain from obscenity and don't post anything that your grandmother would be ashamed to read. Those who do not abide by these guidelines will have their membership revoked without notice. If you see an abusive post, please click the link beside the post to report it.
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