Failed Aussie steelmaker's administrator turfed, new entity appointed by creditors
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E-mail Xinhua, April 13, 2016
Debt laden Australian steel maker Arrium Ltd has been forced to turf its self-appointed administrator in favour of insolvency firm KordaMentha, chosen by the company's creditors as political scrutiny of the steel industry intensifies.
Arrium appointed administrator Grant Thornton last week to restructure the Whyalla steel works in South Australia state, and the company's 93 subsidiaries, however, in a deal encompassing Australia's "big four" banks and the Australian Workers Union (AWU), appointed KordaMentha in a bloodless coup overnight.
"When it became clear that the major stakeholders wished to see a change to a firm not appointed by Arrium, we agreed for the benefit of the process to support an early change as opposed to waiting until the first creditors meeting," Grant Thornton managing partner Paul Billingham told Australia's national broadcaster Wednesday.
Arrium and its 93 subsidiaries were placed in administration last week with debts exceeding 2.8 billion Australian dollars (2.14 billion U.S. dollars), including over 1 billion Australian dollars (over 765.8 million dollars) in unsecured loans by the nation's "big four" banks.
The decision followed a rejection by creditors in early April for a 927 million dollar recapitalisation plan by Blackstone private equity group's GSO Capital Partners, which would have seen lenders recouping only 55 Australian cents (42.11 U.S. cents) on the dollar.
Arrium's management has blamed the company's failure on the collapse in global iron ore and steel prices, causing creditors sour on indebted resources companies in the market downturn.
"Steel makers around the world are dealing with what is essentially a failed market," Arrium's chief executive of strategy Naomi James told a recent inquiry into the steel industry.
"We have seen steel prices in absolute terms reduce by 60 percent since 2012. We have seen steel margins over scrap reduce by 80 percent."
This has led to protectionist calls by Australian politicians who claim offshore steel has been entering the Australian market at predatory prices.
South Australia state is politically sensitive in the current election cycle as the unemployment rate has risen to 7.7 percent, compared with 5.8 percent nationally. Arrium's steel division employs 5,500 people, some 1,100 - excluding contractors - at the Whyalla plant alone.
On Wednesday the Australian government announced Assistant Industry Minister Karen Andrews will travel to Brussels, in place of Industry Minister Christopher Pyne, for the OECD talks aimed at addressing the global oversupply of steel.
"This is really a conference of officials. We are leading the way by sending a minister," Pyne told reporters in Adelaide, the South Australia state capital.
KordaMentha partner Mark Mentha said Wednesday that it was business as usual for the Arrium and its steelworks, though it was "far too early" to say what form the company would look like in the future, noting there had been interest from potential buyers.
"We will be looking into that interest but it's far too early to even consider what the company is worth or what sort of you know, strategic sale options are available to us at this stage," Mentha told Australia's national broadcaster.
"And I don't think that will be looked at for some months."
Prior to KordaMentha's appointment, Billingham had said Grant Thornton aimed to "successfully restructure the Australian mining and steel business, starting with Whyalla, as this will increase the value of Arrium's assets, significantly improving the return to Arrium's creditors and encouraging the prospect of a group-wide recapitalization."
Arrium's first creditors meeting will be held next week.
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