(Reuters) - Canada’s Bank of Nova Scotia (BNS.TO) sued Cliffs Natural Resources Inc (CLF.N), saying the U.S. iron ore miner had breached terms of a loan agreement when it filed for creditor protection for its Canadian operations.
Cliffs in January stopped production at its Bloom Lake mine in Quebec, where costs exceeded expectations, and started restructuring the Canadian operations after years of weak iron ore prices.
Cliffs’ shares fell as much as 7.2 percent in morning trading on the New York Stock Exchange on Thursday.
The move to file for creditor protection in Canada accelerated Cliffs’ payment obligations, Scotiabank said in a lawsuit filed in a U.S. District Court in Ohio on March 16.
Scotiabank is claiming damages of about $52.6 million.
In response to the bank’s notices, Cliffs denied that it was obligated to repay the debt immediately, Scotiabank said in the lawsuit.
Andrew Chornenky, a spokesman for the bank told Reuters he would not comment on matters “that are before the courts.”
Cliffs was not immediately available for comment.
The court’s decision will determine whether Cliffs has to immediately pay back the loan made for equipment used in Bloom Lake.
“If a bankruptcy filing is an event of default under the terms of the contract, then they will be asked to pay,” CRT Capital Group analyst Amer Tiwana said.
“If it’s not, then they can continue to pay the monthly or quarterly payments they have to.”
Cliffs had about $3 billion in debt outstanding as of Dec. 31 and $290.9 million in cash and cash equivalents.
Cliff shares were at their lowest in more than a decade. They had lost more than three-quarters of their value in the 12 months through Wednesday.
Editing by Saumyadeb Chakrabarty and Joyjeet Das