Algoma Steel Completes Restructuring Transaction and Emerges from CCAA Protection
Algoma sought and obtained CCAA protection on November 9, 2015 and carried out a sale and investment solicitation process to identify sale and/or investment opportunities in respect of its business and assets. As described below, Algoma completed a comprehensive restructuring transaction (the “Restructuring Transaction”) and emerged from CCAA protection on November 30, 2018.
In September 2016, lenders in an ad hoc committee of term lenders, represented by Osler, Hoskin & Harcourt LLP, and lenders in the Ad Hoc Committee of Noteholders, represented by Goodmans LLP, entered into a restructuring support agreement (the “RSA”) and agreed to develop, support and implement the Restructuring Transaction. The parties to the RSA (the “Secured Lenders”) subsequently amended the RSA in August 2017 and May 2018 to extend the timeline for completion of the Restructuring Transaction and to modify certain of its financial terms.
The Restructuring Transaction was completed through a purchase by Algoma Steel Inc. (the “Purchaser”) of substantially all of the business and assets of Algoma. The Restructuring Transaction was approved by the Ontario Superior Court of Justice (Commercial List) (the “CCAA Court”) in the CCAA proceedings and by the U.S. Bankruptcy Court in the Chapter 15 proceedings.
Pursuant to the RSA, Algoma’s term lenders and senior secured noteholders exchanged their existing secured claims for equity in the Purchaser and the Secured Lenders backstopped and funded a US$285 million exit term loan in connection with the completion of the Restructuring Transaction. The Purchaser also obtained exit financing under a syndicated revolving credit facility.
To complete the Restructuring Transaction, the Secured Lenders achieved consensual agreements or other arrangements with respect to Algoma’s key stakeholder groups, including updated collective bargaining agreements with Algoma’s labour unions; the transfer of the assets of Port of Algoma Inc. (“Portco”) to the Purchaser and a related settlement with Portco’s third party lenders to ensure the Purchaser’s access to Algoma’s port facility and to effectively unwind a 2014 transaction between Algoma and Portco with respect to the port facility which the CCAA Court found to be oppressive; and agreements between the Purchaser and the federal, provincial and municipal governments with respect to a range of matters. To facilitate the completion of the Restructuring Transaction and a negotiated arrangement between the Secured Lenders and Algoma’s labour unions with respect to pension matters, the Province of Ontario passed a regulation concurrently with the completion of the Restructuring Transaction with respect to Algoma’s pension plans.
Earlier in the CCAA proceedings, the CCAA Monitor, on behalf of Algoma’s stakeholders and with the support of the Secured Lenders, successfully brought an oppression action to obtain relief in respect of the 2014 transaction between Algoma and Portco (an affiliate of Algoma’s parent company) with respect to Algoma’s port assets. The Ontario Court of Appeal unanimously upheld the oppression decision.
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