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Business North - The Daily Briefing - Business Newspaper Online
Loan extension granted for Essar Steel
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12/15/2009 by Beth Bily |
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Interest and principal repayment on loans from Iron Range Resources to Essar Steel Minnesota was granted a three-month reprieve at a Monday meeting of the Iron Range Resources Board.
Essar Steel Minnesota plans to construct a $1.6 billion iron mining to steel making operation near Nashwauk, MN. Per previous agreement, the company asked the IRR Board to grant the repayment extension on a $6.13 million loan (including accrued interest) issued by the agency. The company negotiated a four-year window of yearly extensions beginning in December of 2008 into its loan terms. Essar received a one-year extension on payments last December.
Extensions on loan repayments by IRR are based upon demonstration of forward progress – and the definition of progress generated board debate.
Rep. Tom Anzelc, DFL – Balsam, first expressed concern that loan extensions made by the economic development agency were becoming routine. “As a matter of fact we just forbear, rather than requiring interest payments, which could be used for other projects,” he said.
Anzelc then questioned the definition of significant process, saying that the infrastructure work that has taken place was funded by the state, not the company.
Narasimhan Ramakrishnan, director of finance for Essar Steel Minnesota, said the company currently has about $115 million invested in the project. He later said however, that $85 million of that total included the purchase price.
Some legislators also voiced concern because the accruing interest on Essar’s loans was unsecured per the agreement in place. “We should be getting paid interest at some point or have it secured,” said Rep. David Dill, DFL – Crane Lake.
Rep. Tom Rukavina, DFL – Virginia, motioned to allow the extension to April 1, which would provide enough time to renegotiate the letter of credit with Essar to include accruing interest or the company would be required to pay interest to date.
In other business, the IRR Board:
• Approved a $350,000 infrastructure grant to the city of Silver Bay for a 16-unit assisted living facility.
• Approved $140,000 in public works grants.
• Approved a $215,000 matching funds grant to the Range Cities Health Care Collaborative, which includes Virginia Regional Medical Center, Grand Itasca Clinic and Hospital and Range Regional Health Services. Funds will be used for organization start-up costs.
• Approved a $1.7 million Taconite Development Fund rebate to Keewatin-based Keetac, owned and operated by U.S. Steel Corp. Funds will be used for exploratory drilling, tailings basin reclamation and dust control and implementation of a new Welcome Creek Treatment system.
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