Algoma Steel has secured $500 million in federal and Ontario government loans to offset the effects of U.S. tariff hikes on its business.

The federal unsecured portion gives Ottawa the option to purchase an ownership stake in company, which faces a 50% import tariff on the sale of its products to the U.S.

The package consists of a $400-million loan from the federal government and a $100-million loan from the province. The loans will have a Canadian Overnight Repo Rate average plus 2% for the first three years and an additional 2% each year afterward. Both loans carry a seven-year term.

The arrangement is intended to support Algoma’s ongoing modernization plans, including investments aimed at enhancing competitiveness and long-term sustainability.

Under the stock-purchase option, the federal government can buy 6.77 million warrants, with each being convertible into one common share of Algoma at an exercise price of $11.08 per share for a 10-year term.

The federal loan was the first under the government’s $10-billion Large Enterprise Tariff Loan program.

“All public companies participating in the program will be required to issue warrants,” the federal finance department told The Toronto Star. 

Algoma CEO Michael Garcia told the Star that the loans will give the company time to pivot its business as the tariff now that the U.S. market is “pretty much” closed to it.