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A crucible once used to carry molten steel is seen outside the Essar Steel Algoma plant November 13, 2015 in Sault Ste. Marie, Ont.Kenneth Armstrong/The Globe and Mail

The bidding for Essar Steel Algoma Inc., which is operating in creditor protection, will come down to negotiations between stakeholders, including discussion of a bid backed by the steel maker's former parent, Essar Global.

The steel maker's management and stakeholders have been ordered by the Ontario Superior Court to present "a procedure for going forward" in the restructuring. The order came after KPS Capital Partners LP withdrew from the bid it made in partnership with Essar Algoma's term lenders, one that had already been accepted by management.

The company and its stakeholders, including the term lenders, the holders of two separate classes of notes, the Ontario government and the United Steelworkers union, which represents workers at the company's mill and office in Sault Ste. Marie, Ont., have been given until Aug. 18 to reach a deal.

Essar Algoma has been operating under the protection of the Companies' Creditors Arrangement Act since November.

"The stakeholders do not need a reminder of the crucial importance of pushing the ball across the finish line," Judge Frank Newbould said in a ruling.

The term lenders have said they are prepared to press forward with the bid that was originally accepted as the winning offer for the company. That bid was strongly opposed by the union.

Sources familiar with the restructuring said KPS withdrew from the combined Essar Algoma bid and a separate attempt to purchase U.S. Steel Canada Inc. after the New York-based private equity firm could not reach agreements with the Ontario government. Ontario is a key stakeholder in both restructurings because of huge pension liabilities that need to be assumed and potential environmental costs.

Essar Global is proposing a $903-million (U.S.) bid for its former unit that is backed by the union.

Other stakeholders are proposing different restructuring plans and there are offers of new debtor-in-possession financing to replace the existing DIP loans.

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