Obama administration declines a $730 million loan for steelmaker Severstal North America

Article by Christian A., on January 9, 2012

The Obama administration made the decision last Friday to oppose the closure of a loan of up to $730 million for steelmaker Severstal North America, whose financing bid to expand a plant for auto steel production has attracted the attention of congressional investigators who are evaluating Energy Department loan programs.

Congress has yet to make a conclusion about Severstal's application but the Energy Department said that it has decided not to proceed with the financing for the wholly owned subsidiary of Russia's OAO Severstal.

Damien LaVera, an Energy Department spokesman, said that not all projects that get a conditional commitment are able to close its loan.

The agency had a Friday deadline to decide if it will finalize terms approved conditionally last year for financing for the expansion of its Dearborn, Mich., plant to form steel that are lighter and stronger for auto production.

In 2004, the Russian steelmaker acquired the plant, originally built by Ford Motor, from former owner, Rouge Industries Inc.

The advanced vehicle initiative of the Energy Department is involved in the congressional scrutiny of the agency's overall loan programs after a politically charged controversy related to financing of Solyndra, the bankrupt solar company.

The Republican-led House Oversight Committee had received information about the Severstal loan from DOE. Darrell Issa, the chairman of the panel, inquired last October why Severstal deserved a low-interest taxpayer loan of as much as $730 million considering the status of its parent as a global firm.

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