Essar Steel Minnesota, bankrupt and seeking capital from a new holdings company, is still providing headaches to its parent company Essar Global back in India. John Myers at the Duluth News Tribune reported Dec. 7 that banks in India are suing Essar over problems on the Nashwauk iron ore project.
The Economic Times reported Wednesday that lenders, lead by ICICI Bank of India, filed the suit in the New York state court system seeking $560 million in damages, claiming Essar Group allowed massive cost overruns in the Nashwauk project and failed to make scheduled loan interest payments starting in October, 2015.
Though it’s unclear what this will mean for Essar Steel Minnesota, losing $560 million in court would significantly impact how much money Essar could allocate to finish the Nashwauk project. Construction on the half-complete project stopped a year ago.
A new investor, SPL Advisors, is attempting to broker a debt settlement satisfactory to the lenders and contractors, acquire the Nashwauk property and restart construction, hoping to have the project finished within two years, employing some 350 people and producing 7 million tons of taconite iron ore pellets annually.
SPL has until early February to develop a deal satisfactory to the bankruptcy judge, lenders and contractors.
For a time last summer, it seemed Cliffs Natural Resources’ ambitions to take over the Essar project would hold sway in bankruptcy proceedings. Cliffs CEO Lorenco Goncalves wants the project to be the first in a series of value-added iron plants as part of his long term strategy to serve the electric arc furnace market. But the judge has given Essar Steel Minnesota time to try to find its own way to complete the project.
It seems we’re waiting once again — this time until February — to see what SPL and Essar come up with. Meantime, the parent company could lose half a billion dollars in court.