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Letter to AWU National Secretary, page-41

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160 Posts.

25/01/17

10:36

Post #: 22125290
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Originally posted by Boges ↑

Key words here are: "Unless there is a recapitalization". This would mean under the DOCA the creditors allowing some temporary debt writeoff or conversion to equity (hopefulyl not too much) such that Arrium returns to trading.

8 months ago, there was no chance of this happening. Now things are different and there is a chance. Here's why:

Steel prices up 100% since then,
Tariffs in place of 30% to 50%
Iron ore prices up 100% ,
Federal Governments $49 million loan for the machinery that will lift the price of iron ore Arrium's gets to 100% of the spot price (62% Fe content) instead of 88% of the spot price, (to be operational by end of April 2017).
$50 million from the SA Government to upgrade Whyalla and maybe some more from the Federal Government.

there is NOW a possibility of this happening, especially if the offer price for Arrium Australia is too low.

I think in the 2016/2017 financial year, Arrium Australia should do around $450 million EBITDA. And in 2017/2018 if Iron Ore can hold up at around US$55 per tonne (above the US$44 KM was forecasting) it should do that again in 2017/2018. Even after allowing for the interest repayments on the debt Arrium owes and the need for capital expenditure each year (mining and steel), they should still be able to set aside around $300 million of EBITDA (out of $475 million) for repayment of debt owed.

So by 30/6/2018 you would have $1,730 million + $275 million + $300 million = $2,305 million. Of course there is a large tranche of principal debt that has to be repaid in July and August 2017 (about $800 million) so it will reduce by this amount come September 2017. Take that out then you have $2,880 - $800 million = $2,080 million in debt as at 30/6/2018 (and cash on hand of $2,305 - $800 million = $1,505 million. And of course once that $800 million of debt is repaid in July/August 2017, the interest payable starts to drop as well.

Though given the potential class action lawsuit from shareholders I would think the creditors and KM (who works for their interests and not the shareholders) may not want this happening.

By the end of February 2017, Arrium Australia should have around $1,730 million in cash. Gross debts were $2,880 million plus $400 million to trade creditors (and $600 million to employee entitlements - which would simply carry over if returned to trading or sold off).

DODD and research. The only white elephant is the Whyalla Steelworks.

When will the Federal Government show its hand ..........?????

And it need not take big money either (say $100 million plus the $50 million from the Government) . Remember, if it closed altogether the Commonwealth Government would be up for $100 million per year in welfare payments - and the banks would lose more money too.

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Boges the unemployment payments wouldn't be 100mill, most people would move on and get another job, and most wouldn't even be eligible for a dole payment. be very similar to holdens, won't be a huge bill in dole payments. Holding onto that hope for a reason it won't shut is simply stupid.

ARI Price at posting: 2.2¢ Sentiment: None Disclosure: Not Held
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