While some companies may find themselves in dire financial straits due to fiscal mismanagement, there are some corporations that are driven to seek bankruptcy protection because of factors that are completely out of their control. For example, there are many times when a sudden shift in the market occurs due to the introduction of new proprietary technology, or a dramatic change in demand ensues because of economic pressures. Readers in Kentucky may be interested in a recent story about the reasons that Essar Steel was forced to declare Chapter 11 bankruptcy.
Essar Steel is a mining company that has operations in India, Canada,Vietnam, Indonesia, Trinidad and Tobago, and the upper Midwest region of the United States. In the U.S., Essar was building a $1.7 billion taconite plant in order to mine for the material that is a low grade type of iron ore used to make steel. The company pursued this endeavor primarily because China’s steel industry was expected to grow exponentially over the coming years. However, this did not turn out to be the case.
As China’s steel industry stalled and production of taconite continued, the price for the commodity dropped significantly. The price dropped from $190 per tonne to a low of $50 per tonne. Essar began to quickly default on their loans and recently decided the prudent course of action was to file for Chapter 11 bankruptcy protection.
Any company that chooses to declare Chapter 11 bankruptcy will certainly face unique challenges, as the circumstances that led to the decision to seek bankruptcy protection can vary tremendously. Regardless of the circumstances a Kentucky company may be facing, it could be beneficial to speak with an attorney who focuses on bankruptcy law. An attorney who focuses on this area of law will be able to properly evaluate a client’s unique financial situation and discuss the most advantageous types of bankruptcy and debt relief that may be available
Source: Forbes.com, “Essar Steel Minnesota’s Chapter 11 Bankruptcy – Another Victim Of The Chinese Steel Industry“, Tim Worstall, July 10, 2016