Court Hearing Ends without Resolution on the Fate of Magnetation’s Bankruptcy

by San Antonio Attorney

A bankruptcy court hearing attended by a number of lenders, employees and vendors of Magnetation LLC are still waiting for the resolution of the case as the hearing ended without a decision from the court.

Judge William Fisher scheduled another hearing last Oct.  6 to tackle the two main options: Whether  to grant an extension to Magnetation’s founders in looking for an investor that will save the company, or accept a settlement agreement made in September that is going to stop the operations for good and split the assets among the biggest creditors.

In September, the bankruptcy judge temporarily agreed a “global agreement” to inflate the company and sell off its assets in order to repay some of its major creditors.  The creditors who were not included in the payment under the agreement have objected, yet it is still uncertain if their objections are going be an issue.  The Minnesota vendors were not included in the global agreement and their claims are worth millions of dollars.

The settlement agreement specified that Magnetation would discontinue all ongoing operations on Oct.  14 or earlier.

The settlement agreement requires AK Steel to pay $32 million to end a purchase deal for Magnetation iron ore pellets, a deal which resulted in a lawsuit.  In addition, AK would be allowed to bid on the company assets, just like other investors, when it is finalized.

The owners of Magnetation are still hoping that an investor would take the plunge, assume the debt payments, save the company and retain the workers and management.

Magnetation failed to get a renewal of land leases from Itasca County mainly because of the objections from vendors that the company owes.

From May 2015, the company has been in bankruptcy with an estimated $1 billion in liabilities.  During its peak, Magnetation employed about 500 people.

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