Area firms help launch $880M steel plant project (SeverCorr).
 
Area firms help launch $880M steel plant project
By Shawn A. Turner
Cleveland Business
6:00 am, October 10, 2005

Four Northeast Ohio firms are playing key roles in one of the largest industrial construction projects undertaken nationwide this year.

The project is an $880 million, 1.2 million-square-foot steel plant in Columbus, Miss., that is expected to be in operation by the end of 2006. Construction began last week on the plant, which will have the capacity to produce 1.5 million tons of steel sheet per year for use by foreign auto-makers with U.S. plants.

The steel plant will be in Mississippi, but it has a strong Cleveland flavor. Global Principal Partners LLC, a firm started by four former McDonald Financial Group employees, arranged the financing by finding lenders and equity investors, and National City Corp. provided a portion of the financing. Baker & Hostetler LLP served as the lead law firm on the project, and Ebner Furnaces Inc. of Wadsworth is providing equipment for the plant.

The project marks the biggest transaction by far for Global Principal Partners, which was formed two years ago. Until the Mississippi deal, that distinction belonged to a $100 million merger of two steel companies in Thailand that Global Principal Partners arranged last year.

The four people who run Global Principal Partners - Ahab Garas, Ari Levy, Julie Payne and Dave Stickler - left McDonald following its 1998 acquisition by Cleveland's KeyCorp. After their noncompete agreements ran out, they launched Global Principal Partners. The group specialized in steel industry transactions while at McDonald, and it retains that focus at Global Principal Partners.

The new steel company in Mississippi is called SeverCorr and is headed by John Correnti, former CEO of Charlotte-based steelmaker Nucor Corp. Mr. Correnti met Mr. Stickler, senior managing director at Global Principal Partners, when Mr. Stickler worked at McDonald. This is the first time the two men have worked on a project together, Mr. Garas said.

A's for effort

Mr. Correnti lauded Global Principal Partners for its work persuading stakeholders that America's troubled steel industry is worth the investment.

'If you mentioned steel, until recently a certain number of people would run for the exits,' Mr. Correnti said. He said Global Principal Partners did fine work in raising the needed money over about a two-year period, adding, 'I'd give them quadruple `A's' for hanging in there.'

Raising the money was challenging, Mr. Stickler said.

'A lot of people, their first question is, `Who's your corporate backer?'' Mr. Stickler said. 'Well, we don't have a corprate backer.'

A number of factors helped win over questioning investors, Mr. Stickler said. First, banks were put at ease when told that less than half of the $880 million was in senior debt. Also, other investors were happy to hear that the company had presold 20% of its steel for the next seven years to an unidentified Japanese supplier to automakers.

Investors included General Electric Co.'s GE Capital, Russian steelmaker OAO Severstal Group and German bank KFW Bankengruppe. Hedge funds and venture capitalists also were called upon to invest, Mr. Stickler said.

Baker & Hostetler was involved in a number of the project's aspects, including the structure of the deal and negotiating the contracts involved. Al Adams, a partner at the law firm, was one of the Cleveland attorneys who worked on this deal after doing business with Mr. Stickler on other steel projects.

Kim Swisher, senior project manager for Ebner Furnaces, declined comment last week on his company's involvement with the project. Kelly Wagner Amen, a National City spokeswoman, confirmed the bank's participation in the project's financing but was not able to provide details.

Global Principal Partners had hoped to finance a steel plant closer to Ohio, but ultimately lower utility costs and an abundance of auto- related companies in the South nixed that idea - for now, at least. Mr. Stickler said the firm hopes to finance future plants near Ohio, possibly on the state's border with Kentucky.

The Mississippi plant will not create an excess of U.S. steel supply, he said.

'We will effectively be displacing imports,' Mr. Stickler said.

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