Algoma Steel Inc. Announces Proposed Offering of US$350 Million of Senior Secured Second Lien Notes due 2029
Algoma Steel Group Inc. announced the offering of US$350 million Senior Secured Second Lien Notes due 2029 by its subsidiary, Algoma Steel Inc., to enhance its balance sheet. The Notes will be guaranteed by ASI's parent company and subsidiaries, with the proceeds intended for general corporate purposes.
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Algoma Steel Group Inc. is strengthening its balance sheet by offering US$350 million Senior Secured Second Lien Notes due 2029.
The Notes will be guaranteed by ASI's parent company and subsidiaries on a senior secured basis.
Proceeds from the offering will be used for general corporate purposes, providing flexibility and strength to the company's balance sheet.
The announcement by Algoma Steel Group Inc. regarding the issuance of Senior Secured Second Lien Notes worth US$350 million is a significant financial maneuver that warrants attention from a financial perspective. The decision to fortify their balance sheet through this offering indicates a strategic move to enhance liquidity, which could be a response to potential capital investments, debt refinancing, or other corporate needs. From the investor's standpoint, the security of these notes being backed by the parent company and all subsidiaries adds a layer of assurance, potentially making the offering attractive.
However, it is essential to consider the implications of adding more debt to the company's capital structure. The interest obligations that come with such a significant amount of debt could impact future cash flows. Investors should closely monitor the company's debt-to-equity ratio and interest coverage ratios post-issuance to assess the long-term financial health of Algoma. Additionally, the notes not being registered under the U.S. Securities Act of 1933 suggests a limited market, targeting qualified institutional buyers, which could affect the liquidity and marketability of these notes.
The legal implications of Algoma Steel's issuance of notes are noteworthy, particularly the decision to bypass public registration under the United States Securities Act of 1933. By offering these notes only to qualified institutional buyers and relying on Rule 144A and Regulation S, Algoma is engaging in a private placement, which necessitates a different level of disclosure and due diligence compared to public offerings. This approach often expedites the capital-raising process but also limits the pool of potential investors to those who meet specific criteria.
Prospective investors should be aware of the legal nuances such as the notes' senior secured status, which gives them priority over unsecured debt in the event of a default, but still places them subordinate to any first lien debt. The guarantee by the parent company and subsidiaries is a strong legal commitment that enhances the security of the investment, but it also means that the entire corporate family is affected by the performance of these notes.
Examining the market context in which Algoma Steel is issuing its Senior Secured Second Lien Notes, it's important to recognize the competitive landscape and the steel industry's cyclical nature. The decision to strengthen the balance sheet could be indicative of Algoma's preparation for industry downturns or to capitalize on upcoming growth opportunities. Market trends such as demand for steel products, pricing pressures from global markets and input costs significantly affect companies like Algoma.
Investors should consider the current state of the steel industry, including import/export dynamics and any regulatory changes that could impact Algoma's operations. The timing of the note issuance, market conditions and the company's performance relative to its peers will all play a role in the success of this financial initiative and its reception among institutional investors.
03/25/2024 - 08:00 AM
SAULT STE. MARIE, Ontario, March 25, 2024 (GLOBE NEWSWIRE) -- Algoma Steel Group Inc. (NASDAQ: ASTL; TSX: ASTL) (“Algoma”), a fully integrated producer of hot and cold rolled steel products including sheet and plate, announced today that its indirect wholly-owned subsidiary, Algoma Steel Inc. (“ASI”), intends to offer for sale US$350 million aggregate principal amount of Senior Secured Second Lien Notes due 2029 (the “Notes”). The Notes will be guaranteed on a senior secured basis by ASI’s immediate parent company and all of ASI’s subsidiaries. Pricing and consummation of the offering of the Notes are subject to market and other conditions. ASI intends to use the net proceeds from the offering of the Notes for general corporate purposes, adding strength and flexibility to its balance sheet.
The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state and may not be offered or sold in the United States absent registration under the Securities Act or an applicable exemption from the registration requirements thereof. The Notes will be offered and sold in the United States only to qualified institutional buyers in accordance with Rule 144A under the Securities Act and outside the United States in reliance on Regulation S under the Securities Act. The Notes will be offered and sold in Canada on a private placement basis pursuant to certain exemptions from applicable Canadian securities laws.
This news release does not constitute an offer to sell or a solicitation of an offer to buy the Notes in the United States or any other jurisdiction, nor shall there be any sale of the Notes in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction or an exemption therefrom.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains “forward-looking information” under applicable Canadian securities legislation and “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 (collectively, “forward-looking statements”), related to the offering of the Notes, the application of the net proceeds therefrom, and Algoma’s business. These forward-looking statements generally are identified by the words “intend,” “future,” “will,” “would,” “will be,” and similar expressions. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions. Many factors could cause actual future events to differ materially and adversely from the forward-looking statements in this document. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and Algoma assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
About Algoma Steel Group Inc.
Based in Sault Ste. Marie, Ontario, Canada, Algoma is a fully integrated producer of hot and cold rolled steel products including sheet and plate. Driven by a purpose to build better lives and a greener future, Algoma is positioned to deliver responsive, customer-driven product solutions to applications in the automotive, construction, energy, defense, and manufacturing sectors. Algoma is a key supplier of steel products to customers in North America and is the only producer of discrete plate products in Canada. Its state-of-the-art Direct Strip Production Complex is one of the lowest-cost producers of hot rolled sheet steel in North America.
Algoma is on a transformation journey, modernizing its plate mill and adopting electric arc technology that builds on the strong principles of recycling and environmental stewardship to significantly lower carbon emissions. Today Algoma is investing in its people and processes, working safely, as a team to become one of North America’s leading producers of green steel.
As a founding industry in their community, Algoma is drawing on the best of its rich steelmaking tradition to deliver greater value, offering North America the comfort of a secure steel supply and a sustainable future as your partner in steel.
For more information, please contact:
Michael Moraca Treasurer & Investor Relations Officer
What is Algoma Steel Group Inc. offering?
Algoma Steel Group Inc. is offering US$350 million aggregate principal amount of Senior Secured Second Lien Notes due 2029 through its subsidiary, Algoma Steel Inc.
How will the Notes be guaranteed?
The Notes will be guaranteed on a senior secured basis by ASI's immediate parent company and all of ASI's subsidiaries.
What will the proceeds from the offering be used for?
The net proceeds from the offering of the Notes will be used for general corporate purposes, enhancing the company's balance sheet.
Are the Notes registered under the United States Securities Act of 1933?
No, the Notes have not been and will not be registered under the United States Securities Act of 1933.
Who can purchase the Notes in the United States?
The Notes will be offered and sold in the United States only to qualified institutional buyers in accordance with Rule 144A under the Securities Act.
