Essar Steel Algoma hires debt restructuring advisers

Canadian dollar's strength over the past few quarters has left steelmakers reeling

Essar Steel Algoma Inc, a Canadian affiliate of Indian energy and resources conglomerate Essar Global Group, has hired financial and legal advisers to assist it with a debt restructuring, according to people familiar with the matter.

The move illustrates the impact of the drop in steel prices on companies such as ESA. Credit rating agency Moody's Investors Service Inc warned earlier this month that it saw no meaningful catalyst for an improvement in ESA's performance.

ESA has hired investment banking advisory firm Evercore Partners Inc and law firm Weil Gotshal & Manges LLP to assist with the restructuring as it struggles with its debt pile, the people said on Monday.

The sources asked not to be identified because the appointment of the advisers is confidential. ESA and Weil did not immediately respond to requests for comment, while Evercore declined to comment.

The Canadian dollar's strength over the past few quarters has left the country's steelmakers reeling, as cheaper imports from China, the biggest producer of the metal, flood the market, hurting prices.

Based in Sault Ste. Marie, Ontario, ESA manufactures steel products and sells them to the automotive, light manufacturing, construction, shipbuilding and energy industries.

ESA has $627.1 million in bonds outstanding, according to Thomson Reuters data. Moody's expects the company's operating loss to widen from the C$28.9 million it reported in the quarter that ended June 30.

ESA has also been in a dispute with an iron ore supplier, Cliffs Natural Resources Inc, but announced in October that it found an alternate source of the material.

ESA has run into financial trouble before, filing for bankruptcy in 2014. The company completed a $1.4 billion recapitalisation and refinancing in November 2014, a deal that included $750 million in debt.