Is Essar Global serious about buying back our steel mill?

If Mumbai-based Essar Global Fund Ltd. is serious about making a play for Essar Steel Algoma, it might seriously think about talking to Brian M. Denega.

Denega is a senior vice president at Ernst & Young, the court-appointed monitor in Essar Algoma's insolvency proceedings under the Companies' Creditor Arrangement Act.

Denega acts as the court's eyes and ears, overseeing the steelmaker's restructuring and its efforts to find a new buyer or investors.

In the case of Essar Algoma, he appears to wield enormous influence.

Whether he's asking for retention bonuses for key executives or temporary relief from the company's City of Sault Ste. Marie tax bill, Denega usually gets what he wants from the court.

But in a report issued yesterday, the monitor disclosed that Essar Global subsidiary Ontario Steel Inc. has been surprisingly slow in expressing its interest to him.

In his report to the court, Denega outlined his extensive and ongoing involvement with the term lenders previously involved in a joint bid for Essar Algoma with private equity firm KPS Capital Partners LP.

KPS lost interest last month.

The term lenders are now preparing a standalone bid.

Denega said that the lenders have been involved in talks, under his supervision, with Essar Steel Algoma, as well as with the Government of Canada, Province of Ontario and City of Sault Ste. Marie, the ad hoc committee of senior noteholders and the United Steelworkers.

Ontario Steel has been much slower off the blocks.

"Although the monitor has been advised that a corporation identified as Ontario Steel Inc., which the monitor understands is owned and controlled by the ultimate parent of Algoma, intends to submit a formal bid for Algoma, neither the monitor nor the [Essar Steel Algoma] have received such a bid as at the date of this report," Denega said.

"The only information the monitor has concerning this possible bid is the letter of intent and attached term sheet that United Steelworkers Local 2251 filed with the court," the monitor said.

Through Ontario Steel, Essar Global has been trying reclaim ownership of the Sault steel mill and also to acquire U.S. Steel Canada properties in Hamilton and Nanticoke.

Last week, U.S. Steel announced it was rejecting Essar Global's advances, but Ontario Steel was said to still be interested in Essar Steel Algoma.

Reached tonight by SooToday, United Steelworkers Local 2251 President Micheal Da Prat insisted that's still the case.

"They are definitely interested," said Da Prat, whose union has signed a letter of intent favouring Ontario Steel.

"We have been having contract talks with them and will be continuing."

Last week, about 10 representatives of Essar Global from India, the United Kingdom and New York were in town, joining Ontario Premier Kathleen Wynne and 100 or more locals at a Bellevue Park barbecue.

In his latest report, Denega said that Essar Algoma has exhausted the debtor-in-possession (DIP) financing on which it has survived since last November.

The steelmaker has access to about $6.5 million in additional liquidity from a revolving facility but that money may only be used under certain circumstances.

Denega outlined Essar Algoma's ongoing efforts to refinance or extend the DIP financing.

On September 15, the company will ask the court to extend its existing DIP facility to September 30, 2016.

In view of the possible involvement of Essar Global in a bid for the Sault mill, Essar Algoma Steel is no longer holding meetings of its board, special committee or audit committee.

Steel prices have rebounded impressively since the Sault steelmaker sought protection from its creditors last November, but a slight softening has occurred in recent weeks, causing Algoma and other steelmakers to reduce their prices.

A court hearing was held today in Toronto in the Essar Steel Algoma insolvency case.

No court orders were forthcoming.