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Three court decisions affecting Essar Algoma

The steelmaker was granted a one-month extension of its insolvency protection on Thursday. It also regained control of its web services
20160603 Essar Steel Algoma KA 01
FILE PHOTO: Essar Steel Algoma. Kenneth Armstrong/SooToday

A senior provincial judge rendered decisions on three issues Thursday in Essar Steel Algoma's proceedings under the Companies' Creditors Arrangement Act .

First, Justice Geoffrey B. Morawetz, regional senior judge for Toronto region, approved a one-month extension of Essar Algoma's insolvency protection until Apr. 30.

It was the eighth such extension since the steelmaker was granted protection from its creditors on Nov. 9, 2015.

Justice Morawetz said he was satisfied the extension is reasonable under the circumstances and Essar Algoma and other parties are acting in good faith and with due diligence.

The company's last extension expired on Thursday.

As SooToday reported earlier today, Essar Algoma asked for the extension to Apr. 30 to allow it to continue making steel while participating in mediation talks in Toronto.

Second, Judge Morawetz agreed to help Algoma regain control of its web services.

Morawetz ordered New Delhi-based Net4 India, an Internet domain registrar and web hosting company, to transfer the registration back to the Canadian company.

The Algoma domain has always been owned by Essar Steel Algoma, but registration was moved nine years ago to a Net4 account controlled by Jayantha Prabhu, chief information officer at Essar Group.

Prabhu hasn't responded to Essar Algoma's request that he co-operate in transferring control of the domain, court was told.

All access to Essar Algoma's webmail, mobility gateway, customer portal, virtual private network and other applications goes through the domain.

Essar Algoma wants its web services hosted at GoDaddy instead of Net4, with the account administered by one of its own employees.

In his third decision on Thursday, Justice Morawetz refused to order Essar Algoma to resume its monthly cargo-handling payments to the Port of Algoma, preferring that the issue be decided by Justice Frank Newbould, who has been supervising Essar's Companies' Creditors Arrangement Act file.

The request for resumption of the US$3 million monthly payments was made by GIP Primus LP and Brightwood Loan Services LLC, who financed the US$150 million term loan that enabled Port of Algoma to buy Essar Algoma's port assets in November, 2014.
GIP wants the monthly payments to be made directly to itself.
The City of Sault Ste. Marie is fighting the proposed payments to GIP, arguing that Essar Algoma owes it $26.5 million in property taxes and the city's claim takes precedence in law over GIP and all secured creditors.
Ontario's Municipal Act states that municipal taxes "are a special lien on the land in priority to every claim, privilege, lien or encumbrance of every person except the Crown, and the lien and its priority are not lost or impaired by any neglect, omission or error of the municipality or its agents or through taking no action to register a tax arrears certificate."
Properties on which Essar Steel Algoma has unpaid property tax bills include:
  • 00000 Wallace Terrace
  • 1048 Queen Street East
  • 00000 Ontario Avenue
  • 150 Conmee Avenue
  • 80 Hudson Street
  • 00000 Portage Lake
  • 73 Huron Street
  • 105 West Street
  • 833 Wallace Terrace
  • 399 Base Line Road
  • 1177 Base Line
  • 00000 Base Line
  • 40 Yates Avenue
  • 32 Yates Avenue

In a factum filed on Tuesday, GIP's lawyers said that if Algoma doesn't immediately resume payments under the cargo-handling agreement, it wants the court's permission to deny Algoma access to the port and its facilities.

Half of Essar Steel Algoma's assets are on port lands and the facility is considered essential to the steel mill's ongoing operations.

"Justice Newbould is clearly aware of the GIP issues as well as the competing interests of all parties," Judge Morawetz said on Thursday.
Newbould won't be available to hear the matter until the week of Apr. 10, so Morawetz adjourned it until Apr. 11 for scheduling.
Court dates of Apr. 18 and 20 have been reserved for hearing the matter, if Justice Newbould is agreeable.