Financial trio in talks about an Arrium deal
Up to three large financial firms — excluding those classed as private equity — are believed to be engaging with Arrium, discussing potential deals that could see the company’s Whyalla steelworks remain in operation.
While it is unclear which entities are involved, sources say they’re not superannuation funds or companies based in China.
Possibilities include Canada’s Brookfield, operating through one of its longer-term funds, or Japanese and Korean companies such as Nippon or Hyundai.
It wouldn’t be surprising if South Korean steel giant Posco was in discussions, given that it has made attempts to buy Arrium in the past.
Australian state and federal governments have become increasingly interested in the future of Whyalla ahead of the federal election in July.
A closure of the operation could create a mass of unemployment within the South Australian town, 395km from Adelaide, and trigger defaults on mortgages held by the Australian top four banks, which are also Arrium lenders.
While private equity firms are eager to buy the business in a quest to secure the lucrative Moly-Cop operation — one of the world’s largest manufacturers of steel grinding balls, which are used in mining — it is understood that the proposals received have involved shutting down Whyalla.
This was the strategy of Blackstone, which proposed to recapitalise the business, leaving lenders with little more than 50c in the dollar.
The rejection of that proposal by Arrium’s syndicate of at least 24 banks was the catalyst for Arrium to be placed into administration.
KordaMentha is now Arrium’s administrator, and the South Australian government is influencing the decision-making, with a seat at the table on the creditors’ committee.
Sources say this means any group eager secure the $1.5bn-plus Moly-Cop will have to come up with a proposal that sees the continuation of the Whyalla steelworks, if it is not sold beforehand to another party.
Arrium’s steel operations turned around from a loss-making position in the six months to December and some optimists say the business can be improved through production efficiencies to become more viable.
Before Arrium collapsed, it is understood that Australia’s big four banks were lobbying to re-run the sale of Moly-Cop using Fort Street Advisers, rather than UBS or Lazard, to explore whether they could achieve a higher price that might come closer to covering the $2.8 billion of loans.
Prominent legal expert Leon Zwier at Arnold Bloch Leibler is now understood to be working closely with KordaMentha after earlier advising the syndicate of lenders.
Source:
http://www.theaustralian.com.au/bus...l/news-story/25def0cf507ee53ff2453c4627481a5e
