The big four banks continue to see a rising wave of potential bad debts thanks to the resources downturn. From Peabody to the Wiggins Island Coal Export Terminal, the corporate loan book for the big four isn't as pristine as it once was.
The Arrium situation is creating more angst than most, with the embattled steelmaker's banks being asked over coming weeks to vote on GSO's debt proposal.
The problem is GSO's restructuring deal would immediately crystallise debt losses for the bank syndicate, removing any so-called "runway" for the banks to recover that value over time.
Then again, all may not be lost. It's understood an alternative debt proposal is being prepared by a large London-based fund.
As revealed by Street Talk, Argand Partners LLC and New York's Cerberus Capital Management tabled a joint proposal for Arrium's Moly-Cop earlier this year and remain keen to engage with the lenders with regards to an offer for the entire company.
Another logical acquirer could be specialist investment manager Pamplona Capital Management which also threw its hat into the ring last year for Moly-Cop.
While its involvement was unconfirmed, sources said London-based Pamplona, which has a €3 billion private equity fund, had the necessary firepower to broaden its offer to include the entire company.
Alternative proposals prepared for Arrium, page-2
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