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One of the reasons mechanics liens are such a valuable tool is that they create a secured debt interest in the property to which the lien is attached. In bankruptcy proceedings, this becomes invaluable because, generally, secured debts are given first priority. Unfortunately, these secured debts often exceed the assets of the bankrupt party. When that happens, priority rules sort out the mess.

Minnesota Contractors Going Unpaid

The Iron Range in Minnesota has been home to mining since the mid 1800’s. During this time, the range has faced its share of economic ups and downs. The area is no stranger to the boom-or-bust nature of the mining industry, but lately a pair of companies have left an alarming wake of unpaid contractors and suppliers. Altogether, Essar Steel and Magnetation LLC owe nearly $100M to their contractors and suppliers. Contractors going unpaid is a problem. Contractors missing out on over $95M is a catastrophe.

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Essar Steel

Essar Steel owes a lot of people a lot of money. The company, based in India, has been fighting to get its Minnesota taconite plant producing for what seems like an eternity. Essar failed to construct its facilities on the site, and now faces bankruptcy. Meanwhile, contractors who worked with Essar have gone unpaid. The bill has reached a cool $74M in unpaid sums to contractors, and it doesn’t look like there will be enough money to go around. Altogether, Essar’s liabilities have reached $1.1B. Of that total, over $1B is secured. Holding a mere $208M in assets, Essar won’t come close to repaying all of its debtors. For the 65 secured debtors, hopefully they will get something. Despite all this, the company is seeking approval for over $200K in employee bonuses.


Not long ago, Magnetation LLC seemed like a company on the rise. The company had created a revolutionary process, literally finding treasure in another man’s trash. Magnetation utilized a separation process making it profitable to extract iron ore from the tailings of prior mining operations. However, when the price of iron dropped, the company could not withstand the blow. Magnetation had to file for bankruptcy.

Currently, Magnetation is looking to emerge from bankruptcy. However, the company must first resolve its liens.

According to Magnetation, the company has an unnamed buyer who is interested. The buyer, in a shocking turn of events, is seeking to buy Magnetation without also acquiring its debts. These debts include over $20M in liens. In an attempt to resolve the issue, Magnetation made a settlement offer to its unpaid contractors  4 cents on the dollar up front, along with a promissory note for 20% of the debts to be paid over the next 4 years. Understandably, the deal was rejected by most contractors. Magnetation came back to the table offering 10 cents on the dollar up front, and 40% on a 4 year promissory note. No deal has been struck, but officials from Magnetation have commented that there’s a real sense of urgency to get it done. Should the potential buyer back out, the company would be liquidated and hundreds of employees would lose their jobs.

Previously, we have provided other considerations in Minnesota lien law. If you have more questions about the state’s lien laws, check out our Minnesota Lien Law FAQs.

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Contractors Going Unpaid in Minnesota's Iron Range
Due to recent economic struggles on Minnesota's Iron Range, there have been many contractors going unpaid. Two companies account for $90M+ in debts.
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