Hundreds of employees, lenders and vendors are still waiting to see what happens to Magnetation LLC after an all-day bankruptcy court hearing Tuesday that went into the evening with no resolution.
Judge William Fisher ordered the hearing continued to Thursday with no decision on two major options: Whether to give Magnetation's founders more time to find a savior investor and keep the company operating, or approve a settlement reached in September that will close operations and divide the assets among the largest creditors.
The judge in September tentatively approved a "global agreement" to blow up Grand Rapids-based Magnetation and sell off its assets to help pay off some of its largest creditors. Other creditors, including small Minnesota companies that helped build Magnetation's plants, have objected, but it remains unclear if their objections will be a factor. Those Minnesota vendors are owed millions of dollars collectively.
The settlement agreement assumed Magnetation would cease all remaining operations on or prior to Oct. 14, the judge noted in the motion, setting the end for what had been a rising star in Minnesota's iron ore business.
Under the settlement agreement, AK Steel would pay $32 million to the creditors to terminate a purchase agreement for Magnetation pellets, an agreement that has been the subject of ongoing legal action. AK also would have the right to bid on Magnetation assets, as would other investors, once the bankruptcy is final.
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Magnetation's owners have been holding out hope that a savior investor would jump in, agree to pay off debts, keep the company running under the same management and keep employees working.
The company had hoped to secure a renewal of leases for land from Itasca County, but so far the county has refused to agree, citing complaints from vendors who have yet to be paid. Company leaders Larry and Matt Lehtinen have offered to repay some of what's owed to those vendors.
Magnetation has been stuck in bankruptcy since May 2015, listing over $1 billion in debt and less than half that in assets after growing rapidly when iron ore prices were high. At one point the company had more than 500 employees as it rocketed into Iron Range headlines in recent years with a proprietary technology to recover valuable iron ore concentrate out of leftover waste material from decades-old mining sites.
After iron ore prices crashed in 2014, the company lost customers and saw dwindling demand, forcing it to close three of four Iron Range operations, lay off hundreds of workers and file for bankruptcy.
Now, only about 180 people are employed at Magnetation's lone remaining iron ore concentrate recovery plant still operating outside Grand Rapids. The company employs another 165 people at a pellet-making plant in Reynolds, Ind.
Those jobs could end any day.
Magnetation has several legal entities, including Magnetation LLC, Mag Lands LLC, Mag Finance Corp., Mag Mining LLC and Mag Pellet LLC.
