The newly bankrupt Essar Steel Minnesota named a new CEO Thursday, tapping an industry veteran to replace the controversial Madhu Vuppuluri.
Essar, which filed for Chapter 11 bankruptcy protection last week, named Matthew Stock as CEO effective immediately.
Stock was the managing director of a debt-ridden iron-ore mine and pellet operation in India that was owned by Stemcor Holdings Lt. Stock was let go in 2013 with several other key officials after a failed buyout bid for Stemcor.
In a statement, Essar officials said that hiring Stock, a 25-year-industry veteran, is “a major step in the company’s strategy to complete its 7-million-ton per year iron-ore mine and pellet plant operation located in northern Minnesota.”
The future of the unfinished $1.9 billion construction project in Nashwauk has become hotly contested. Essar insists it will finish the project. Cliffs Natural Resources has been invited by Minnesota state officials to take it over.
A week ago, Gov. Mark Dayton said Essar violated a debt repayment agreement and ordered the state not to renew Essar’s mineral lease, which controls about 44 percent of the project’s land. Cliffs would have right of first refusal on the leases. Essar officials insist the nonrenewal notice is “invalid.”
The battle over who will ultimately finish the mine and ore pelletizing plant is likely to be decided in bankruptcy court.
Dayton has clearly sided with Cliffs, appearing on Tuesday with Cliffs CEO Lourenco Goncalves at a public meeting to discuss the issue. Cliffs currently runs Hibbing Taconite, United Taconite and Northshore Mining on Minnesota’s Iron Range.
At Essar Steel Minnesota, Stock replaces Vuppuluri, who has taken a new leadership position with Essar Capital, officials said Thursday.
Vuppuluri had been CEO of the problem-plagued Iron Range project since 2007. That’s when the India-based Essar Global bought Minnesota Steel Industries and renamed it Essar Steel Minnesota. Since then, the Nashwauk project has been saddled with financing woes, costly delays and a string of broken promises that infuriated state officials, brought months of threats and prompted unpaid contractors to walk off the Nashwauk job site several times.
This week, Essar officials said they have a letter of intent to receive $250 million in new equity financing from SPL Advisors LLC. They separately hope to procure another $650 million in debt financing so that they can continue the project in Nashwauk.
In a statement Thursday, Stock acknowledged that “we face many challenges. But overcoming them will be more than worth it when the plant goes online and becomes the lowest cost [producer of] iron ore pellets in the U.S. … I am very excited about the opportunity to get the project back underway.”
Preliminary debt schedules included as part of Essar’s Chapter 11 bankruptcy filing in Delaware last week show that Essar owes $349 million in term loans to claimant(s) represented by agent U.S. Bank National Association.
It also owes $530 million in “project finance debt” to lenders represented by the agent ICICI Bank Singapore. About $139.5 million is owed to suppliers represented by agent Central Bank India.
Smaller amounts include more than $64 million owed to the state of Minnesota for infrastructure grants and $15.3 million in litigation money owed to Atlantic Specialty Insurance Co. of Minnetonka.
Other sums owed include: $7.9 million to the U.S. Internal Revenue Service; $2.9 million to Axis Capital Inc.; $2.185 million to Paul Hastings LLP in California; $2.08 million to FLSmidth Inc. in Bethlehem, Pa., and $1.15 million to Sylvain Maggard, which is also known as Orleans Management Group LLC.