All the money’s going to out-of-town lenders who’ve kept the mill running since Nov. 2015. So far, the City of Sault Ste. Marie and local trade creditors have yet to see a dime 271
A rejuvenated Essar Steel Algoma Inc. has repaid US$42.7 million (C$57.1 million) to key lenders over the past six weeks, according to financial results released Wednesday.
Brian Denega of Ernst & Young, the court-appointed monitor overseeing Algoma’s restructuring, says based on the cash balance projected for tomorrow (Friday, Mar. 31), Algoma expects to pay an additional US$2.5 million on Monday.
The payments are being made through weekly court-ordered “cash sweeps” payable to the debtor-in-possession (DIP) lenders who’ve kept the mill running since Nov. 2015.
If the steel mill’s unrestricted cash exceeds US$25 million at the end of any Friday, it must “sweep” the excess (calculated to the nearest US$100,000) to the DIP lenders.
Next week’s payment would reduce the outstanding balance on Essar Algoma’s debtor-in-possession facility to $164.8 million.
The payments don’t include tens of millions of dollars owed to the City of Sault Ste. Marie for property taxes and to local trade creditors.
The following are payments made under cash sweeps in February and March:
Feb. 13, 2017 – $6.7 million
Feb. 21, 2017 – $3.1 million
Feb. 27, 2017 – $6.6 million
Mar. 06, 2017 – $12 million
Mar. 13, 2017 – $7.2 million
Mar. 20, 2017 – $7.1 million
Mar. 27, 2017 – —————-
An updated short-term cash flow forecast released yesterday for the period Mar. 25 to May 5 shows expected net operating cash flow around $12 million.
“Starting in late March 2017, Algoma has ramped up raw material disbursements,” Denega says.
“Algoma will continue to ramp up raw material purchases after the reopening of the Great Lakes shipping season in order to restore its inventory stocks to normal levels,” the monitor said.
“The increased raw material disbursements are projected to absorb a majority of improved cash collections driven by higher selling prices.”
Mediation between Essar Steel Algoma and its United Steelworkers locals, retirees and consenting creditors started in Toronto on Mar. 22 and continue under a media blackout.
In notes to its latest financial forecast, the company indicates that its sales receipts and other projections make no allowance for labour disruptions:
“High uncertainty exists due to the current status of union negotiations and the associated media exposure, however the projection does not include any negative impact in this regard.”