Algoma Steel Secures C$500 Million Liquidity Support from Governments of Canada and Ontario

Executive Summary

• Algoma Steel Group Inc. executed binding term sheets for C$500 million in government liquidity support (C$400 M federal loan + C$100 M provincial loan).
• The financing includes issuance of 6.77 million common share purchase warrants at C$11.08 per share, a seven‑year term, and interest of CORRA + 200 bps stepping up annually.
• Concurrently, Algoma announced operational adjustments: exiting blast furnace and coke oven operations and accelerating its transition to electric arc furnace (EAF) steelmaking, with total EAF project cost now estimated at C$987 million.

Key Details

• Financing Structure – C$400 M unsecured tranche funded by the Government of Canada; C$100 M third‑lien secured tranche funded by the Province of Ontario.
• Warrant Component – 6.77 M common share purchase warrants, exercisable at C$11.08 per share for a 10‑year term, vesting proportionally as unsecured draws are made.
• Interest Rate – CORRA + 200 bps for the first three years, increasing by an additional 200 bps each subsequent year.
• Term – Seven‑year loan facilities with customary positive and negative covenants, including a restriction on capital distributions.
• Conditions to Funding – Completion of definitive loan documentation and receipt of all required approvals under Algoma’s existing first‑lien revolving facility.
• Operational Shift – Due to Section 232 tariffs closing the U.S. market, Algoma will cease blast furnace and coke oven operations and focus on EAF steelmaking.
• EAF Project Cost – Updated total estimated cost of completing the electric arc furnace project: C$987 million.
• Strategic Focus – Post‑transition production to concentrate on as‑rolled and heat‑treated plate, plus select coil products for domestic Canadian demand.
• Government Support Rationale – Highlighted by senior executives as critical to maintaining Canada’s industrial base and enabling Algoma’s transformation toward greener steel production.

Notable Quotes

“The government’s financial support underscores their recognition of Algoma’s critical role in Canada’s industrial base… By combining essential liquidity with targeted support for our transition to EAF steelmaking, this support allows us to move forward with confidence.” – Michael Garcia, CEO
“By aligning operations with market realities and advancing the EAF strategy, we safeguard Algoma’s future.” – Rajat Marwah, CFO