Essar Steel Minnesota Files Chapter 11 Bankruptcy

by San Antonio Attorney

Essar Steel Minnesota (ESML) has filed for Chapter 11 bankruptcy after the state of Minnesota decided to revoke the company’s leases for mineral.

Essar failed to pay its dues to the government amounting to $66 million. The company had been given a nine-month extension for the leases.  The U.S. unit of Essar, which is owned by Ruia holding company based in London, has about $1 billion debt.

Essar initially planned to build a $1.8-billion steel mill in Minnesota, but because of the financial crisis in 2008 the project was scaled down to a pellet plant.

The venture was supposed to start manufacturing in 2014. However, China’s production of cheap steel made it unfeasible for Essar. Also, another unit of Essar in North America filed for bankruptcy and its industrial plant is reportedly being sold.

Tata, a steel company based in India, is dealing with a similar predicament with its steel mill operations in Great Britain. It is losing 1 million pounds every day.  On July 8, Tata moved to sell the company and explore other options available.

In Minnesota, the Essar grouping is discussing to sell its 45% stake to  Rosneft  for the price of $2.8 billion. It also plans to sell 25% of its stake in the refinery at the same appraisal. The money that will be generated from the sale will be paid to its debt in India. According to Essar, they expect to cut their debt by 50% after they sell their stakes in the refinery.

Following the Indian government’s regulation on importing steel from China, Essar’s production at its plant in Hazira, Gujarat plant has increased to 70%. Earlier, Essar tried to sell 30% of its stake but did not get any offer to buy.

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