Essar Steel Minnesota's former parent company, Mumbai, India-based Essar Group, is being sued by a group of Indian banks for delays and cost overruns at the bankrupt Iron Range project.
The Economic Times reported Wednesday that lenders, lead by ICICI Bank of India, filed the suit in the New York state court system seeking $560 million in damages, claiming Essar Group allowed massive cost overruns in the Nashwauk project and failed to make scheduled loan interest payments starting in October, 2015.
The lenders invoked corporate guarantees by Essar's offshore holding company. Essar Global Fund Ltd, a Cayman Islands-based operation owned by the Ruia family, which owns and operates Essar Group and its subsidiaries, the Economic Times reported.
It's not clear how the New York lawsuit against Essar Group might impact any bankruptcy court settlement in the Essar Steel Minnesota case being handled in federal court in Delaware. But if the Indian banks are successful in winning money out of the Essar parent company, that could reduce the amount of money involved in the bankruptcy case for the Minnesota project.
A new investor, SPL Advisors, is attempting to broker a debt settlement satisfactory to the lenders and contractors, acquire the Nashwauk property and restart construction, hoping to have the project finished within two years, employing some 350 people and producing 7 million tons of taconite iron ore pellets annually.
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SPL has until early February to develop a deal satisfactory to the bankruptcy judge, lenders and contractors.
The Nashwauk mine and processing plant project, now estimated at more than $2.4 billion to complete, has sat shuttered and half-built for a full year, with Essar out of cash unable to pay vendors or creditors. Essar Steel Minnesota filed for bankruptcy protection in July.
