Algoma Steel Group Inc. — financial distress indicators
Financial-health summary
Algoma Steel Group Inc.'s reported numbers place it in the 'Very weak' financial-health band (distress score 71/100). The main indicators are operating profit does not cover interest, cash runway under 12 months and material debt with no ebitda. Independently, the Ohlson accounting model puts its 1-year failure probability at 95% and the market-implied (Merton) default probability is 10.5%. In its favour: strong current ratio (2.49).
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Interest coverage (EBIT / interest) is -9.20×.
When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.
At the current free-cash-flow burn, cash covers ~2 months.
Going-concern standard: management must assess ability to continue for 12 months (ASC 205-40). Runway below that horizon forces dilution, asset sales or default.
Debt is 45% of assets while EBITDA is not positive.
With no operating earnings, repayment depends entirely on asset sales or fresh capital.
O-score 2.96 → model probability 95%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Revenue changed -25% year over year.
Falling sales reduce cash available for debt service.
Merton distance-to-default 1.25 σ → PD 10.5%.
Investment-grade issuers typically have 1-year PD well below 1%.
Operating margin fell from 10% to -37% in two years.
Sharp margin compression signals loss of pricing power or cost control.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Strong current ratio (2.49).
📰 Recent news scan
- ASTL Oct 2026 5.000 call (ASTL261016C00005000) stock price, news, quote and history - Yahoo Finance UKGoogle News · 2026-10-08
- Algoma Steel Group (NasdaqGM:ASTL) Stock Forecast & Analyst Predictions - Simply Wall StreetGoogle News · 2026-10-04
- Algoma Steel Group (ASTL) Receives a Buy from Stifel Nicolaus - The Globe and MailGoogle News · 2026-10-03
- A replacement turbine restored full power. Algoma expects its second furnace to ship steel in the fourth quarter. - Stock TitanGoogle News · 2026-10-01
- Algoma Steel: High Costs Continuing To Disinterest Investors (NASDAQ:ASTL) - Seeking AlphaGoogle News · 2026-07-08
- Algoma Steel Group Inc. (ASTL) Stock Falls on Q1 2026 Earnings - Quiver QuantitativeGoogle News · 2026-05-12
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do Algoma Steel Group Inc.'s financial-health indicators show?
As of 2026-10-08, Algoma Steel Group Inc.'s public financial data places it in the 'Very weak' band with a distress score of 71/100, driven by operating profit does not cover interest, cash runway under 12 months and material debt with no ebitda. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Algoma Steel Group Inc.'s financial distress score?
71/100 ('Very weak'). Ohlson O-score 2.96 (model 1-year failure probability 95%). Merton distance-to-default 1.25 σ (model default probability 10.5%).
What works in Algoma Steel Group Inc.'s favour?
Strong current ratio (2.49).
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
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Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.