According to Essar, the lenders and senior bondholders have agreed on a plan that proposes an investment of up to US$425 million, a US$1.15 billion reduction in its long-term debt and a reduction in its annual cash interest expense of US$125 million.

“We are very pleased to see an overwhelming majority of our secured lenders unifying to present a plan for the future of Algoma. This cooperation signals a collaborative approach, and we look forward to working with them, the (United Steelworkers union), the various levels  of government, and all other stakeholders towards a final plan that achieves our shared goal of a stronger, more competitive Algoma,” said Essar Algoma chief executive Kalyan Ghosh in a statement.

The company has been operating under creditor protection for nearly a year and is continuing to look for an exit.

A consortium made of up of its term lenders and a U.S. investment firm had offered to acquire the steelmaker earlier this year, but those plans hit a snag after the iinvestment firm backed out of the deal.

Following that, the term lenders said they would continue to work toward bringing the sale to fruition on their own. Essar said the recapitalization plan contemplates either a restructuring or an asset sale.

In the meantime, Essar said it has negotiated additional debtor-in-possession financing that gives it USS$35 million more in liquidity. That should be enough to allow Essar Algoma to continue operating through the end of January, according to the court monitor in the case.