Essar Conglomerate Faces $1 Billion Lawsuit From Minnesota Unit – by Jacqueline Palank and Jacquie McNish (Wall Street Journal – January 11, 2017)

http://www.wsj.com/

Essar Steel Minnesota accuses parent of hindering iron-ore mine, processing plant

A new lawsuit seeks more than $1 billion in damages from Indian conglomerate Essar Group for alleged misconduct related to a stalled Minnesota iron-ore mine and processing plant.

The lawsuit, filed Wednesday by Essar Steel Minnesota LLC in its chapter 11 case, outlines “a myriad of damaging actions” parent company Essar Global Fund Ltd. allegedly took with respect to the subsidiary.

These alleged actions “exacerbated ESML’s cash starved financial position” and included transferring millions of dollars to affiliated companies not working on construction of the Minnesota mine, for “absolutely no value” in return.

ESML also said in the suit that Essar Global “failed utterly in its obligations” to invest new capital in the unit, depriving it of needed operating funds and cutting off access to additional debt financing. Construction on the iron-ore facility, located in Minnesota’s Mesabi Iron Range, halted in November 2015. ESML filed for bankruptcy last summer.

“ESML is left with a half-completed iron ore pellet plant that will cost hundreds of millions of dollars more to finish; and ESML is burdened with over a billion dollars in claims asserted against it that are directly attributable to the Essar affiliates’ failures to fulfill their obligations with respect to the project,” according to the suit.

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