An Ontario Supreme court ruled Monday that 23 key executives at Essar Steel Algoma will get over $3.5 million in retention bonuses though the names of the executive will be kept secret.
The Ontario Superior Court appointed Ernst & Young as the monitor to oversee the restructuring. At the end of September 2015, Essar Steel Algoma’s outstanding liabilities totalled roughly $2.7 billion and its assets amounted to just over $2.2 billion, the company had just $847,000 in free cash on hand. On December 1st, the company sought approval of their retention plan.
Ontario Superior Court Justice Frank Newbould approved the order in efforts for the company to keep key staff during its restructuring. The company filed for Creditor Protection on November 9th. The news shocked the community and those who did business with the steelmaker. Local businesses are owed tens of millions of dollars for work and the City is owed the biggest chunk with $14 million in back taxes.
The company says it needs to hold onto it’s key staff with a Key Employee Retention Plan (KERP) The judge ruled and agreed with Essar’S CFO Rajat Marwah, that there is risk that kep personnel could leave the company because of its unknown future. The judge noted that most of the 23 key executives are not from Sault Ste. Marie and the retention plan is key to ensure Essar Steel comes out of the creditor protection and set a new course for the company.
What that will look like is still very unknown and whether the company’s creditors will get any of the money owed is very much up to the bankruptcy process. Some believe the company may come back a much smaller company with about 1,000 less employees.