The Sault steelmaker reveals it's now healthy enough to consider replacing its debtor-in-possession financing or even preparing a freestanding restructuring plan of its own.

Buoyed by an improving steel market, Essar Steel Algoma is now hinting it may be healthy enough to emerge from insolvency protection without a new buyer or outside investment.

In addition to reviewing bids from prospective purchasers, company officials "have been evaluating other potential restructuring alternatives, including a potential replacement [debtor-in-possession financing] and a standalone restructuring plan," Rajat Marwah, Essar Algoma’s chief financial officer, said in a sworn affidavit.

The Sault steelmaker is weighing its options with assistance from three court-appointed officials: a chief restructuring advisor, a financial advisor and Ernst & Young, the insolvency monitor, Marwah said.

His affidavit was filed in a support of an Essar Algoma request to extend its Companies’ Creditors Arrangement Act protection another three months until September 16.

The company's protection from its creditors is due to expire this Friday.

A local report published last week incorrectly indicated that the three-month extension had been approved by Ontario's Superior Court of Justice.

In fact, the application has not been approved and the matter will be considered by the court tomorrow.

Meanwhile, Essar Algoma says that all options are still being considered as it proceeds with its court-ordered restructuring.

The Globe and Mail is reporting tonight that the two prospective purchasers of Essar Steel Algoma that have passed all hurdles so far are:

The original syndicate of lenders, led by Deutsche Bank AG. This group provided the US$ 200 million in debtor-in-possession financing on which Essar Algoma has subsisted since last November.



KPS Capital Partners LP - a New York-based private equity turnaround specialist with a reputation for saving jobs and working well with unions.

United Steelworkers Local 2724, representing Essar Algoma's salaried employees, recently agreed to continue working under its existing contract until the company's restructuring is complete.

The collective agreement for Steelworkers Local 2251, representing hourly workers, expires on July 31.

In other news, Justice Frank Newbould of the Superior Court yesterday ordered Essar Algoma into mediation with an ad hoc committee of senior noteholders.

Appointed as mediator is Warren K. Winkler, former Chief Justice of Ontario.

The committee, representing about 70 percent of Essar Algoma's senior secured notes, says the company is doing better and should be focussing less on a rush sale of assets, more on a successful restructuring.