Noront Resources

Delay until Jan 31, 2017.....will this tie into yet another delay of the road announcement?

http://www.saultstar.com/2016/09/22/dip-lenders-want-monitor-to-have-more-power

Essar Steel Algoma

Essar Steel Algoma's DIP lenders are asking a judge to increase the court monitor's powers to authorize him to investigate all transactions relating to Essar Global and its subsidiaries.

It wants the monitor to examine any transactions and determine if the past transactions were detrimental to the steelmaker.

The motion is scheduled to be heard in a Toronto court Friday.

The transactions include the sale of the port property assets to Portco Inc. and the transactions that identify the financial relationship between the port, Essar Steel Algoma and and its parent company Essar Global.

Port of Algoma CEO Anshumali Dwivedi said that the company's lawyers have tried to answer all questions and concerns about the sale in its filed factum and supporting material.

He said Portco has continuously tried to meet with the appropriate parties to renegotiate the arrangement but has not been successful in facilitating those meetings.

The deal between Portco and Essar Steel Algoma was completed in November 2014. It saw Portco own the port assets, including the docks and cargo handling equipment and lease the land for a 50 year term. A 20-year cargo handling agreement was inked between the parties, giving priority access and meets capacity limits to cargo handling services to Essar Steel Algoma.

The deal was struck for a total of $171.5 US million, of which $151.7 million was paid in cash and the remaining $19.8 million issued in a rent note.

Lawyers for the DIP lenders argue that they have been concerned about corporate governance issues since the outset of the CCAA proceedings.

They argue that the length of the agreement and the different lengths in the lease and the handling agreement could pose problems to the steelmaker in the future if Portco doesn't want to renew the cargo handling agreement. It also suggest terms of the agreement are onerous on Essar Steel Algoma and includes one-sided assignment rights to Portco.

It also takes issue with other factors that include excessive minimum volumes, insurance costs and absence of any service level agreements.

In May 2016, payments to Portco were withheld at the insistence of the DIP lenders, a change from the initial protection Portco was given, promising its payments at the outset of the CCAA process.

Portco argues in its court-filed materials that by October 17, 2016, the amount of money owed by Essar Steel Algoma under the cargo handling agreement will be in excess of the $19.8 million issued through the rent note and the company has failed to fund its post-filing obligations under the Cargo Handling Agreement.

“The DIP lenders have been concerned about corporate governance issues since the outset of these proceedings,” the court document filed by the DIP lenders read.

As a result, a chief restructuring advisor was appointed to report on financial issues and his mandate later expanded to assist with the sale and investment solicitation and negotiation process.

The material submitted to the court states that the monitor has expressed concerns about the Portco transaction but does not have the authority to investigate it further.

But the responding Portco documentation states that Portco paid top dollar for the former steelmaker's assets and all the checks and balances were completed at the time of the transaction by both parties.

It notes that it is not the only Essar Global subsidiary that was owed money at the time of the commencement of the CCAA proceedings.

“Algoma also failed to pay Essar Power Corporation Ltd in a net sum of US$4.6 million and Essar Capital Americas Inc in a net sum of US$625,000. The sum currently owed to all of Essar Global's subsidiaries significantly surpasses the amount owing under the Note,” the factum reads.

Portco counters that it has made several attempts to contact the DIP lenders lawyers and the monitor to request the proposed timeframe and budget for the investigation to be conducted by the monitor but has received no response.

“The consultations directed by Justice Newbould have not occurred. No set-off has been asserted and no process to quickly resolve the set-off issue has been proposed,” the factum states.

Lawyers for Portco also argue that the port is necessary for Essar Steel Algoma's operations despite the fact the steelmaker only considers it “an integral” part of its operations, and as such, should receive protections – payments for services rendered – in order to continue to supply the service.

Other court motions will also include Essar Steel Algoma asking the court to give it more time to secure a restructuring plan for the company – until Jan. 31, 2017 – and approve an amended debtor-in-possession loan for the same time period.