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$1.3 billion Arkansas steel mill gets strong push from Northeast Ohio connections

Monday, Mar 30, 2015

A $1.3 billion flat-rolled steel mill currently under construction in Arkansas might still be a pipe dream if not for the involvement of some veteran attorneys at BakerHostetler and a Cleveland executive at investment and advisory firm Global Principal Partners LLC.

The immense project, which is estimated to create 525 high-paying manufacturing jobs in an economically impoverished region of the South, took more than two years to pull off. Its execution involved multiple layers of public and private financing; dealings with the Arkansas government, a German bank, and the Environmental Protection Agency; and legal pushback from a rival steel company.

“Sometimes making sausage isn't the prettiest thing,” said David Stickler, senior managing partner with Global Partners, “but the outcome is fabulous.”

BakerHostetler provided legal counsel and coordination with a team led by firm partners Al Adams and Phillip Callesen. But work arguably began with Stickler, who is stationed in Cleveland for Miami-based Global Partners. The firm, which specializes in massive steel mill projects, owns a 20% stake in Big River Steel.

Stickler originally was approached by a group of entrepreneurs to raise the capital about three years ago, launching a site selection process along with it.

The site in Osceola, Ark., which is about an hour north of Memphis, was preferred because of its location near the Mississippi River and a major railway for shipment of supplies, Stickler said. It also didn't hurt that the area was adjacent to a power plant, because the mill will use an estimated 425 megawatts of power, comparable to the consumption of the city of Nashville.

Beyond securing 1,400 acres for the steel plant, which involved multiple layers of entitlements falling into place, one of the biggest challenges was securing financing. There was no single deep pocket being reached into, Adams noted, so everything had to be blended together with all other moving pieces on the same deadline.

That includes $125 million in bonds from the state of Arkansas and $800 million backed by German-government-owned KfW bank. Big River Steel also has a $650 million contract with SMS Siemag AG, a German steel industry equipment provider.

Ground broke on the project in early July 2014, barely hours after the June 30 deadline imposed by legislation providing the state financing. The plant, which is scheduled for completion in mid-2016, will recycle steel and produce high-strength, lightweight steels for automobiles, tubular goods for the oil and gas industry, and electrical steels.

Calling the project massive is an understatement.

Big River Steel is expected to be unique and have such a big economic impact that the project was recently named the North American Mining & Metals Deal of the Year by IJGlobal Americas, an international infrastructure journal and project finance magazine. According to IJGlobal, the facility is expected to have the highest air quality standards for any electric arc furnace steel mill in the world and will make Mississippi County one of the largest steel-producing counties in the country.

A competing company, Nucor Steel, has tried to block the project with various lawsuits, several of which have been dismissed so far, although Nucor is seeking appeals. One suit alleged the state financing was illegal because it was backed by taxpayer dollars. Another claimed the project didn't follow EPA standards.

“We had to explain to people in Germany about to give us $800 million that we're confident these lawsuits have no merit,” Stickler said. “Culturally, over there, they're just not expecting lawsuits like this.”

The local team that brought the project together marveled at the Cleveland connections to major projects like Big River Steel across the country. One of the most prominent projects Stickler and the BakerHostetler team pushed off the ground includes Steel Dynamics in Fort Wayne, Ind., which formed in 1993 and drew investments from major private equity firm Bain Capital.

In yet another Cleveland hook, John Correnti, chairman and CEO of Big River Steel, once worked in Cleveland. He launched his steel career with U.S. Steel in 1969 where he served in construction management activities until 1980.

His sister, Maryann Correnti, is CFO of Heinen's, Stickler noted.

Professionally, the project was a culmination of decades of experience for those involved, Callesen said.

“Everything you do as a business litigator, these things bring it out,” he said. “There's a complete sense of reward in what we're doing. We're turning farmland into a billion dollar-plus operating business. ... What it takes in legal skill to bring about that kind of transformation can't be underestimated.”

Conference calls were often held at 4 a.m. to accommodate German bankers. Teams often would work until 2 a.m. solving issues.

Stickler said for some, it was like being back in their college fraternity houses, staying up late, working on projects over pizza — although, he assures, without the booze.

 

crainscleveland.com

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