The roller-coaster Essar Steel Minnesota economic ride has taken yet another dip, about a month after it seemed to have stabilized its funding.
India-based Essar, which for six years now has been working on a $1.8 billion taconite plant on the Iron Range, wants more time to secure $464 million in promised equity and loan financing, according to a Star Tribune story, which was based on a report Thursday from Bloomberg News. The company asked bond holders for the extension
The Star Tribune reported on Saturday that Essar did get that relief for an extension. But the company must still cobble together nearly a half-billion dollars in equity and loans.
As part of an agreement announced by Essar last month, the equity and loan money was supposed to have been secured as of Thursday. In exchange, bond investors sold $450 million worth of bonds for Essar, so its plant construction could resume in Nashwauk.
But now the arrangement could be in jeopardy unless investors agree to give Essar more time. If they don’t, Essar will be forced to return the bond money to investors, Bloomberg said.
Essar officials could not be reached for comment.
This week’s funding delay layers on other problems for Essar, whose parent company is in Mumbai.
The Essar Steel Minnesota plant in Nashwauk has been facing financial difficulties for the past two years, causing it to delay payments to several suppliers. That caused several of them to leave the work site in 2012 and 2013 — taking equipment and crews with them.
But things seemed back on track on May 9 when Essar Steel President Madhu Vuppuluri told the Star Tribune that the company was pleased to have successfully arranged to sell $450 million in high-yield bonds. Vuppuluri also said he was delighted that the work on the Iron Range would resume fully as soon as the final details were put to bed.
While Essar Steel had the agreement from bond investors, it still has to provide an additional $361 million in equity financing and get a $103 million loan from its parent company in India.
Now that, too, is up in the air.
The Essar Steel project broke ground on the taconite plant in Nashwauk in 2008. It was supposed to be finished in 2013 and have 350 full-time workers. But as of May, the project had only about 75 workers and the building and equipment were far from finished.
With the new bond agreement reached last month, officials hoped construction might resume this month and be completed in late 2015.
Source: Herald Review