Resolution of the Essar Steel Minnesota bankruptcy filing became more complicated with the filing of a $1 billion claim against Essar by ArcelorMittal. ArcelorMittal is claiming more than $1 billion in losses against Essar. The losses, it contends, stem primarily from the difference in pricing between its agreement with Essar and one ultimately signed with Cliffs Natural Resources.
An order filed in Delaware Bankruptcy Court this week will compel Cliffs Natural Resources, against its objection, to disclose details of its supply agreement with ArcelorMittal.
The order is one piece of a complicated bankruptcy case initially filed by Essar Steel Minnesota in July of 2016. Since that time, a Essar has filed a reorganization plan and rebranded itself Mesabi Metallics, with new investors and new leadership at the helm.
Essar filed for bankruptcy protection on its half-built taconite plant, located near Nashwauk, following notification from the state of Minnesota that it intended to revoke mineral leases critical to the project. The state and Gov. Mark Dayton openly talked of reassigning the leases to competitor Cliffs Natural Resources, whose CEO Lourenco Golcalves promised to build not only a taconite mine, but direct reduced iron facilities.
Essar’s bankruptcy filing was followed by a flurry of other filings, including claims by contractors and others for losses incurred and debts left unpaid by India-based Essar.
Cliffs, however, fought a subpoena to disclose the terms of its 10-year contract with ArcelorMittal, arguing that revelation of its pricing formulas would place the company at a competitive disadvantage.
In an order dated Feb. 6, Delaware Bankruptcy Judge Brendan Shannon denied Cliffs motion to quash.
“It is clear that the pricing formula and related information in the Cliffs Contract constitute trade secrets. Trade secrets are not, however, absolutely privileged from discovery,” wrote Shannon.
To offer as much protection to Cliffs as possible, however, Shannon did limit the disclosure to those representing Essar/Mesabi Metallics, who must have the information in order to assess ArcelorMittal’s claim as it pertains to its reorganization efforts. It is unclear at this point, what impact ArcelorMittal’s claim may have on reorganization efforts.
Meanwhile, Mesabi Metallics has filed its own plan for reorganization with the court. That plan calls for raising at least $250 million in a private placement. Dayton this week objected to the Mesabi Metallics plan, saying the suitor lacks the necessary financial resources to complete the processing plant.
“In its filing, Mesabi Metallics again failed to demonstrate any ability to finance the completion of the Essar construction project or to operate it successfully. For the past 16 months, Essar/Mesabi Metallics has been unable to show the solid financial commitments, sufficient to complete the project and to repay the Range contractors the money they are owed," the governor said in a prepared statement.
“Mesabi Metallics proposes that it be granted possession of the State’s mineral leases for the next 17 years without any commitment to complete the project or begin mining. The DNR terminated those leases last July, when then-Essar once again failed to meet the leases' conditions. However, Essar declared bankruptcy, thus blocking the State's rightful termination of them," Dayton continued.
“I want that half-completed project to be completed and to fulfill then-Essar's long-broken promise to bring new jobs to the Iron Range. Regaining the State's rightful control of its leased properties, so that through an open process they can be transferred to a company with the demonstrated ability to develop and operate a successful project, is essential to bringing important new jobs to the Range. I therefore support the DNR’s decision to object to Mesabi Metallics’ proposal.”