UPDATE 1-KPS Capital Partners backs out of Essar Steel Algoma bid

Thu Jul 14, 2016 5:52pm EDT
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(Updates with United Steelworkers response)

July 14 (Reuters) - Essar Steel Algoma Inc said private equity firm KPS Capital Partners LP had backed out of a consortium that made an offer for the steel maker, but that certain term lenders were still pursuing a bid.

ESA, which was bought nearly a decade ago by Indian energy and resources conglomerate Essar Global, had put itself up for sale while operating under creditor protection.

"The term lenders have indicated that they remain committed to a going-concern outcome for Algoma and all of its stakeholders, and to closing the transaction contemplated by the asset purchase agreement as soon as possible," ESA said.

A group that includes shareholders of Essar Global signed a letter of intent with a local unit of the United Steelworkers Union (USW) on Tuesday to negotiate a deal to buy ESA for about $900 million.

"The USW would like the restructuring effort to be more responsive to the interests of key stakeholders and is considering bringing a motion to the court seeking relief to that effect," United Steelworkers said in a statement.

"With other bidders and/or restructuring proposals waiting in the wings, KPS departure provides opportunity to put restructuring back on track," the union said.

Essar Global said last month that it was opposed to the sale of ESA to New York-based KPS Capital. (Reporting by Manish Parashar in Bengaluru; Editing by Maju Samuel and Anil D'Silva)