The future of Arrium, the country’s number 2 steelmaker, looks more confused this morning after it missed a self-imposed deadline of yesterday to reveal new refinancing and management changes.
Instead the company asked for trading in its shares to be suspended “pending the release of an announcement in relation to the company’s discussions with its lenders.”
There is likely to be no more substantive news on the company’s future for a week, according to yesterday’s statement, which can’t be good for the city of Whyalla in South Australia where Arrium is based, or the company’s employees and smaller creditors.
Arrium later announced that chief financial officer Robert Bakewell, who has been in the role since 2009, had resigned to join Brickworks Ltd as chief financial officer.
And that was that. No news on the refinancing or relations with the group’s bankers, especially the four big local banks who have agreed to advance the company $400 million in new funding, in return for board and management changes and the company asking for a voluntary administrator to be appointed.
Other banks among the bankers and private debt holders are reportedly willing to contribute to the $400 million package.
But brokers and media reports said the lack of any new news on the refinancing and other plans wasn’t good.
Fairfax Media described the company’s future as “increasingly bleak” in the wake of the self-requested suspension of the shares yesterday.
In fact the move to change the trading halt sought Monday, into a suspension, indicates the company could be headed for a voluntary administration and a likely break-up of the business as assets are sold off to try and cut the $2.8 billion in debt.
Australia’s big four banks – ANZ, Westpac, CBA and NAB – are owed a total of $1 billion and have the lead in the talks, according to this morning’s media reports.
Arrium added to the growing sense of unease about its future by adding in yesterday’s request fora suspension of its shares that it “believes that reinstatement of trading in its shares at this stage may be materially prejudicial to the outcome of those discussions and its ability to complete a recapitalisation or restructure”. Arrium said it expects to make a further announcement “within a week".
A key part of any new deal will be the fate of Arrium’s best performing business at the moment – its mining consumables operation called, Moly-Cop.
It was the subject of a buyout proposal from US private equity firms Argand Partners and Cerberus Capital Management earlier this year, but that deal was undermined by the rescue financing proposal from the Blackstone fund, GSO Capital.
The GSO proposal was announced on February 22, (and rejected late last week by the banks). The GSO announcement reportedly upset the banking syndicate because they hadn’t been consulted.
But Fairfax Media reports that the two US groups have remained interested in Moly-Corp. While that could raise $1 billion (hopefully),it would remove the major source of cash and profits in Arrium at the moment.
Moly-Corp makes rail wheels, wire ropes and the steel balls used in grinding and crushing machinery on mine sites (in concentrators for example).
Some reports claim the two US groups could be interested in a bid for all of Arrium, but you can’t see them wanting all the $2.8 billion in debt. With the shares halted at 2.2 cents, the market has been saying shareholders will be wiped out for all intents and purposes by any eventual deal.
