Essar Steel officially goes on the block.

• Author: Helwig, David

Essar Steel Algoma started the search in February for a new buyer or major new investor in its Sault Ste. Marie steelmaking operation.

"We expect to begin the sale and investment solicitation process (SISP) and the search for a buyer by mid-February," chief executive officer Kalyan Ghosh said in a letter sent to suppliers.

"While we are hopeful that 2016 will bring improved market conditions and new opportunities, Essar Steel Algoma is contending with a tight deadline for its financial restructuring," Ghosh said.

"A significant number of variables will have to align to attract a new investor, but the process calls for a deal to be completed and approved by Aug. 31."

Essar Steel Algoma sought protection from its creditors on Nov. 9 under the Companies' Creditors Arrangement Act.

The Ontario Superior Court of Justice required the company to obtain court approval for "a broad sale and investment solicitation process" by Feb. 1.

Essar Steel Algoma is operating with US$200-million debtor-in-possession (DIP) financing that expires on Sept. 1.

Brian Denega of Ernst & Young Inc., the court-appointed monitor, has expressed concern that the steelmaker could well run out of money before then.

"The expedited timeline to develop the SISP was a result of extensive negotiations," Denega said in a report.

"An expedited timeframe is imperative as there is substantial risk...