Bidders eye U.S. Steel Canada-Essar Algoma deal, sources say – by Greg Keenan (Globe and Mail – April 1, 2016)

A deal that would combine Essar Steel Algoma Inc. and U.S. Steel Canada Inc. into a single steel maker is emerging as a potential path out of creditor protection for the two companies.

At least three bidders for Essar Algoma are also kicking the tires at U.S. Steel Canada, sources familiar with the restructuring discussions said, believing that putting the two companies together would create a strong steel maker that would flourish in the Canadian and U.S. markets. The combination of the two companies would be capable of producing more than five million tons of steel annually, ranking it fifth-largest among North American based producers.

New York-based industrial restructuring funds KPS Capital Partners LP and Bedrock Industries, as well as ERP Compliant Fuels LLP, a company set up by a Virginia environmentalist and health-care investor, are proposing to unite the two steel makers, sources said.

The companies and restructuring officials are assessing bids submitted through court-supervised bankruptcy protection under the Companies’ Creditors Arrangement Act. At stake are 5,300 jobs in the Ontario communities of Hamilton, Nanticoke and Sault Ste. Marie, the future of a major chunk of Canada’s steel-making capacity and pensions paid to more than 15,000 retirees.

Initial bids to buy or invest in Essar Algoma are due Friday. In the U.S. Steel Canada restructuring, court-appointed monitor Ernst & Young is studying between five and 10 letters of intent to determine which offers will make it to the second round of bidding.

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