KPS Capital Partners walks away from bid for Essar Steel Algoma

(Reuters) - Essar Steel Algoma Inc [ESSRGE.UL] said private equity firm KPS Capital Partners LP had backed out of a consortium that made a bid for the steel maker, but that certain term lenders were still pursuing a bid.

ESA, bought nearly a decade ago by Indian energy and resources conglomerate Essar Global, had put itself up for sale while operating under creditor protection.

"The term lenders have indicated that they remain committed to a going-concern outcome for Algoma and all of its stakeholders, and to closing the transaction contemplated by the asset purchase agreement as soon as possible," ESA said.

A group that includes shareholders of Essar Global signed a letter of intent with a local unit of the United Steelworkers Union on Tuesday to negotiate a deal to buy ESA for about $900 million.

Essar Global said last month that it was opposed to the sale of ESA to New York-based KPS Capital.

(Reporting by Manish Parashar in Bengaluru; Editing by Maju Samuel)