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Why Arrium collapsed
http://www.copyright link/content/dam/images/1/4/4/8/9/0/image.imgtype.afrAuthorAvatar.120x120.png/1435477665366.png
by Simon Evans
The good and the bad businesses inside collapsed steelmaker Arrium were in the spotlight on Friday in two states, as administrators KordaMentha race against the clock to come up with a package to entice future buyers and save thousands of jobs.
Mark Korda, one of the "Marks" whom the restructuring and insolvency firm is named after, says the east coast steel business which includes an electric arc furnace and mini steel mill at Laverton, near Melbourne, is profitable and a going concern that will power on under any new owner.
Mark Mentha, the other Mark, has a much more difficult problem. He held meetings on Friday in Whyalla with the South Australian Treasurer Tom Koutsantonis and other key officials, with heavy cost-cutting planned at the loss-making steelworks in South Australia to try to stem the red ink in the short-term and preserve enough cash to allow for an orderly sale process.
KordaMentha has become one of Australia's biggest insolvency and restructuring firms after the two Marks hit the spotlight in 2001 when they took on the wind-up of Ansett, which was then Australia's second-largest airline behind Qantas.
http://www.copyright link/content/dam/images/g/h/9/h/p/w/image.related.afrArticleLead.620x350.gocnu8.png/1461340271859.jpg <img src="/content/dam/images/g/h/9/h/p/w/image.related.afrArticleLead.620x350.gocnu8.png/1461340271859.jpg" alt="Mark Korda (left) is optimistic about Arrium's east coast steel business but Mark Mentha of KordaMentha has his hands ..." width="620" height="350" class="lazy620x350"/>
Mark Korda (left) is optimistic about Arrium's east coast steel business but Mark Mentha of KordaMentha has his hands full in Whyalla where the steelworks is losing money. Robert Shakespeare
Mr Korda says the profitable east coast steel business run by Arrium has been overshadowed by the woes at Whyalla. He says the east coast business has a long history and it is 95 per cent "non-dependent" on the Whyalla business.
"This is a profitable, viable going concern. It's been a long-term very good business," Mr Korda told Fairfax Media. He visited the Laverton mini-mill with Victorian Industry Minister Lily D'Ambrosio on Friday who promised there would be projects announced in the Victorian state budget on April 27 that would accelerate orders for local steel.
Mr Korda says Arrium operates from more than 30 sites across Melbourne and country Victoria and employs more than 1000 people in the state. He says the east coast steel business has a viable future no matter what structure the other Arrium assets eventually find themselves in.
A number of options are being pursued for the Whyalla steelworks. "It is the head company that requires recapitalisation," Mr Korda says. Mr Koutsantonis told reporters the main focus was on making sure capital investment in the steelworks was a long-term fix. "We need to see the cost structure improve," Mr Koutsantonis said.
Australian Workers Union national secretary Scott McDine said on Friday the commitment by the Victorian government led by Premier Daniel Andrews to use Australian steel in infrastructure projects needed to be replicated in other states and at a federal level. "The first priority is to get this company back on its feet and continuing on as a national steel champion," Mr McDine said.
The AWU and the big four Australian banks were instrumental in installing KordaMentha as the new administrator of the collapsed Arrium on April 12, tipping the original administrator Grant Thornton out of the job after just six days.
Arrium's creditors are owed $4 billion, with the banking syndicate owed $2.8 billion. There are 35 banks and financiers from around the globe who will all ultimately need to agree on a course of action under KordaMentha's future restructuring options. The banks include ANZ, Commonwealth Bank, NAB and Westpac, along with Morgan Stanley, and more obscure banks such as the Mutual of Omaha, Bank of Nova Scotia, Taiwan Co-Operative Bank and the Banque Cantonale de Geneve from Switzerland.
(20min delay)