- Stakeholders, federal and state govts sked to assist
- Administrator says aim is to restructure Australia business
Arrium Ltd.’s administrator said it is working with a task force set up by the South Australia government to assess options to keep the steel and iron-ore supplier’s Whyalla mill in business.
Grant Thornton LLP, named to oversee the company last week after lenders rejected a $927 million recapitalization plan, said it will invite other key stakeholders to work with it, the federal and state governments, along with Arrium’s existing management in Whyalla, according to an e-mailed statement on Sunday.
“Our aim is 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,” Paul Billingham, the Arrium administrator, said in the statement.
Steel mills are facing a global squeeze from creditors as the industry buckles under a flood of Chinese exports. Arrium’s announcement came a week after India’s Tata Steel Ltd. said it’s considering the sale of its unprofitable U.K. division. Arrium’s shares, which plunged 97 percent in the past three years, were halted April 6 after lenders rejected a proposed funding agreement with GSO Capital Partners.
Arrium’s best performing unit, a mining consumables division that makes grinding and crushing equipment used in mining and processing, will be largely unaffected by the appointment of administrators, according to a statement from the administrator on Thursday. Efforts to sell that unit earlier failed to meet expectations, Arrium said in February as it posted a first-half loss.
The administrator has secured support from Arrium’s suppliers, customers and employees and stabilized the business, according to Sunday’s statement.
Arrium’s net debt grew to A$2.1 billion as of Dec. 31, from A$1.75 billion at the end of June, according to filings.
Global steel mills are struggling to contend with steel exports from China, which accounts for about half of global output. The country’s sales overseas surged to an all-time high last year, as local producers grapple with waning domestic consumption. Arrium flagged in February it may mothball the unprofitable Whyalla plant and last year shuttered iron-ore mines and booked writedowns.
Arrium’s underlying net loss in the six months to Dec. 31 widened to A$24 million, from A$22 million a year earlier, on weaker prices and faltering demand, the producer said in February. Arrium employs about 5,500 people in its steel division, according to an annual report published in September. The Whyalla plant has 1,100 staff, excluding contractors, the company said in an October filing.
“Our joint aim is to now swiftly bring together all key parties in a collective effort to save Whyalla and we have stepped up the flow of information between Arrium and the Steel Taskforce since our appointment to ensure this,” Billingham said in Sunday’s statement.
Any job cuts will be a further blow to South Australia and may pressure Prime Minister Malcolm Turnbull’s government, with elections as little as two months away. South Australia is saddled with the highest unemployment rate among the nation’s states, rising to 7.7 percent in February, compared with a national average of 5.8 percent.