Hi Geraldine,
Firstly, I am a long-time supporter of your insightful and entertaining approach to journalism, thank you!
However; it is with much disappointment that yesterday I listened to your interview with Daniel Walton (AWU National Secretary) regarding the sale of Arrium Australia.
The interview was glowing in praise for the roles played by the AWU, KordaMentha and Liberty House in jointly “Saving Whyalla”.
I would like to take a few moments to propose an alternative view.
First some facts:
Arrium Limited has its roots in BHP (the big Australian) and was “spun off” in the 1990’s as OneSteel at the same time as BlueScope. It is a 100-year-old asset of national strategic importance.
Arrium Australia has 10,000 employees, of which 4,000 are employed in Whyalla and the nearby mines.
Arrium Limited has 80,000 shareholders owning 2.94 billion shares at an average purchase price in excess of 1 dollar per share.
Arrium has a diverse set of assets including in the East Coast highly profitable mini mills, tube and wire mills, recycling plants and the OneSteel Metal Centre national distribution network. Production sites include Rooty Hill, Laverton, Newcastle and Brisbane.
Arrium Limited went into Voluntary Administration in April 2016 owing 2.8 billion AUD to creditors.
The reasons for VA are varied but key factors are:
The Federal Government failing to protect our local steel industry by not implementing anti-dumping legislation, allowing our markets to be flooded with cheap, inferior quality, Chinese and others imports.
Poor decisions at Arrium board and executive level, such as to borrow and purchase Southern Iron at an overvalued price at the bottom of the commodity cycle. The mine was soon mothballed.
To reduce the debt to manageable levels the Administrators sold the global market leader of grinding medium MolyCop in October 2016 for 1.6 billion AUD, leaving debt at 1.2 billion AUD.
Since entering VA, in 15 months the average price of iron ore and steel per tonne has risen by 80 percent. The Australian steel industry is booming with significant upside in construction and infrastructure demand for steel. Bluescope shares had hit record highs this week in excess of $14 per share.
The Argument
After the sale of Molycop, in a global and local steel cycle boom, why is Arrium being sold at all?
Why is the outstanding debt of 1.2 billion dollars not being refinanced by the big 4 banks?
Why hasn’t the Administrator recommended to the creditors committee, the refinancing of debt, the appointment of a new board and the resumption of trading of Arrium on the ASX?
Why is the rumoured sale price of 700 million AUD, not being formally publicized, is it because it’s a “fire sale” price, with EBITDA at 400 million AUD plus pa?
Is it common knowledge that the potential owner will have access to 1.8 billion AUD of tax credits from accumulated losses transferred from Arrium?
Is it known that Liberty House have a business model of buying distressed steel assets (Tata Steel UK) at “basement” prices and then gaining considerable concessions from governments and trade unions to run the business.
80,000 shareholders where do they fit in? The forgotten 80,000 mum and dad investors, pensioners, self-funded retirees, current employees and ex-employees with company share plans. Are they being wiped out with 3 billion dollars of losses or are they been offered fair compensation?
No one knows as the sale details are unknown, the company financials are also unknown with KordaMetha being granted by the Federal Court a postponement of lodgement of financial returns until November 2018.
There has been a total lack of transparency and engagement with shareholders, the owners of the business.
As a shareholder representative, I have had approaches from hundreds of everyday Australians with tales of potential financial ruin. With permission I could share those stories.
The “big end of town” are the winners here with hundreds of millions of dollars of fees and commissions selling a company that frankly does not need to be sold.
This should have been a resounding WIN-WIN for all parties with the company relisted and Whyalla saved.
Our story also needs to be told.
ARI Price at posting:
2.2¢ Sentiment: Hold Disclosure: Held
