News: ARI UPDATE 1-S.Korean consortium led by Newlake preferred bidder for Arrium - administrator

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A South Korean private equity syndicate led by Newlake Alliance and JB Asset Management has been named as the preferred bidder in the sale process for troubled Australian steel group Arrium Ltd (ARI) , Arrium's financial administrator confirmed on Thursday.

Arrium's committee of creditors decided on the Korean group over Great Britain's Liberty House, the industrials and commodities group that has been snapping up troubled steel plants around the world, according to the administrator, KordaMentha.

Arrium collapsed in April 2016 with A$2.8 billion ($2.13 billion) in debt after creditors rejected a $927 million bailout proposal by private equity group GSO Capital Partners that would have paid no more than 55 cents on the dollar on their claims.

KordaMetha has been overseeing the sales process on behalf of Arrium's lenders. The auction was run by Morgan Stanley.

KordaMentha and Morgan Stanley would now work with the consortium to finalise the sale contract as soon as possible, KordaMentha partner Mark Mentha said in a statement emailed to Reuters.

The creditors' committee includes Australian lenders Commonwealth Bank (CBA) , National Australia Bank (NAB) , Westpac (WBC) and ANZ Bank (ANZ) , which are owed a combined A$1 billion.

A source familiar with the sales process said Newlake will use the Finex steelmaking technology under license from South Korean steelmaker POSCO 005490.KS to revamp the Arrium's main Wyhalla steelworks, which are 76 years old and located in South Australia state. That decision played a key role in the selection process, said the source.

The Korean bid proposes spending more than A$1 billion on the Whyalla upgrade and on Arrium's mini-mills, steel distribution and iron ore mining divisions.

The South Australian state government has pledged A$50 million to the new owner to help upgrade the steelworks.

The final sale is subject to approval by the committee of creditors and the Foreign Investment Review Board.

Seoul-based Newlake Alliance Management is comprised of former executives of private equity giant Blackstone. ($1 = 1.3161 Australian dollars)