Struggling Essar Steel Minnesota has failed to secure the equity financing needed to save a critical bond deal to complete construction of a $1.8 billion taconite plant in Nashwauk, Minn.

Now, local officials worry that the project and 350 future jobs are up in the air.

The problems with Essar’s $450 million high-yield bond deal first were disclosed by Standard & Poor’s and confirmed Monday by local officials.

S & P reported last week that it dropped Essar’s credit rating at the request of management. S & P Assistant Director Chiza Vitta said it appeared that Essar “didn’t meet the deadline to complete the [bond] deal.”

Essar officials declined to comment Monday, but earlier they said the bond deal was contingent on Essar raising $361 million in equity for the project by June. Essar has been trying to raise the money and won a deadline extension in late June. But now it appears that the extension has expired and the deal is off.

As of last week, Essar had paid back all bond holder investors under “a special mandatory redemption,” that included principal and interest, Vitta said. “The fact that those bonds have been redeemed says to me that they were not able to get the rest of the deal in place. So that part of the financing arrangement is now gone.”

Essar Steel Assistant General Counsel Mitch Brunfelt said Essar, whose parent company is based in Mumbai, India, would not comment on the bond deal.

“But we may have new information to report in the near future,” Brunfelt said in an interview. “During the summer, significant expenditures took place on the project for construction and procurement, which are expected to continue.”

The Essar plant would join seven other taconite operations on the Iron Range. It would crush and pelletize 7 million tons of iron ore annually for steel mills in Canada. The plant is on the site of the former Butler Taconite Mine, which shuttered 30 years ago.

Essar broke ground in 2008, promising 1,500 construction jobs, but the project faced delays and significant work didn’t begin until 2011. Construction employment reached 200 to 300 workers before payments to contractors fell behind in 2012 and 2013, and vendors and crews began walking off the job. This spring, there were roughly 70 workers still on the job.

In May, Essar Steel Minnesota CEO Madhu Vuppuluri said the bond deal had “finally reached a stage where it has been priced and is a reality.” With the promise of full-scale construction, the plant was to be finished in mid-2015 and employ 350 full-time workers.

The fresh uncertainty is a setback for city, state and company officials who saw the project as an economic development win for the Iron Range.

Nashwauk Mayor William Hendricks said that he learned of Essar’s new financing problem days ago. He still believes the company will find a solution.

“This project has such a large investment in it already that somewhere along the line, it will continue,” Hendricks said. “It may not be at the pace that we would like, but they will ramp up again.”

In June, Essar said it had already invested nearly $367 million in the project and committed $350 million more. The state of Minnesota has issued bonds and grants to cover nearly $60 million in infrastructure and other improvements.

Although work has slowed, the structure “is close to 50 percent done,” Hendricks said, adding that Brunfelt and two other Essar officials will meet him at the plant Tuesday to discuss the situation. State officials will be at the plant Thursday to discuss the $6 million loan to Essar that isn’t due until next year.

Officials at the state Department of Employment and Economic Development declined to comment for this article. Tony Sertich, commissioner of the Iron Range Resources and Rehabilitation Board, did not return phone calls seeking comment Monday.

In April, Standard & Poor’s assigned the project a preliminary CCC- rating and placed it on credit watch. Financing the project would be expensive, analysts said in a research note. “We expect U.S.-based Essar Steel Minnesota LLC will be vulnerable to financing, execution and completion risks as the company constructs its iron ore mine and its concentrate and pelletizing plant.”

A year ago, Credit Suisse determined that Essar’s parent firm, Mumbai-based conglomerate Essar Group, was so overleveraged that it made the bank’s global top 10 watch list.