Arrium Shareholders United (ASU) is a group formed by shareholders including many former and current employees, suppliers, mums and dads investors following the dramatic development of the company entering into voluntarily administration due to the disputes between the board of directors and the lenders over the GSO recapitalisation proposal.
See the main objectives of ASU
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HOW YOU CAN HELP
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NEED YOUR SUPPORT
Whether you are workers, suppliers, customers or investors of Arrium, we would like to hear from you.
Join our campaign with the online form or Write to us at arrium.shareholders.united@gmail.com
CAMPAIGN BUZZ
Keep Australian Made Steel Australian Owned
It is WRONG to sell off Arrium Australia to overseas buyer!
Administrator KordaMentha is reportedly targeting overseas companies to purchase Arrium Australia Steelworks and Mine. We urge the government and the regulators to stop the sales for the following reasons:
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National Significant - Arrium Australia is the only structural steel maker in Australia; manufacturing a broad range of steel and steel products such as steel beams, plate, tubes and pipes and wire products used in building, ship, rail and bridge and many infrastructure projects. It is also instrumental to the defence of the country at the time of war.
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Job Security and Workers’ Conditions - Foreign owner is mainly profit driven and is more likely to reduce workforce, workers’ conditions and to shift back-office operations to overseas locations costing hundreds of local jobs.
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Risk of Closure of Whyalla and Underperforming Plants - Foreign owner is more likely to shut down unprofitable part of the business, merging and consolidating operations including the Whyalla Steelworks.
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Subsidise Foreign Owned Company with Tax Payers’ Funds - Tax payers’ monies have been directly injected to the company. Governments’ policies were also introduced to support the company in the way of anti-steel dumping tariffs and encouraging the use of locally made steel for governments’ projects. It does not make sense if all these were to support and subsidise the foreign owner.
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Diminishing Tax Revenue – according to article The next phase of Australia's diminishing tax base? Losing billions in revenue to China & India, Australia’s tax revenue from mining has already started to diminish in the face of tax war with overseas countries like China and India. Foreign owner of Arrium Australia will be likely to take advantage of its offshore operations to transfer tax liabilities to lower tax regime potentially leading the loss of hundred of million dollars tax revenue by the government every year.
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Loss of Government Tax Revenue - In the event that the company is sold to foreign owner, existing shareholders including many superannuation funds, employees, mum and dad investors will liquidate their investment loss in the company which will amount to hundreds of million loss of tax revenue to the government; directly impacting the budget bottom-line while the foreign buyer reaping the reward.
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Loss of Price Control and Adverse Economy Impact – While the government is trying to penalise the dumping of cheap overseas made steel, the same cheap steel importer could possibly be or be associated with the future overseas owner of Arrium Australia. The new owner will be in a monopolistic position to control the pricing of steel which will adversely impact the cost of construction, infrastructure projects and the overall economy as a whole.
Terminate the administration and Return the company back to shareholders
When Moly-cop is sold, the administration should END and the remaining Arrium Australia should return back to the shareholders.
The administrator’s attempt in putting Arrium Australia for sale is WRONG and appears self-interest driven. It simply generates tens of millions of fees for the administrator and investment bankers hired at the expense of the company and shareholders. On one hand, the administrator is playing hard ball asking the workers to bear the substantial cuts in wages and entitlements to save $20m per year while the administrator trying to extract millions of fees from the company and its shareholders.
We should NOT let this injustice to happen and the following extracts from the Corporations Act support us:
1 - Referring to subsection (3)(a) Under Australia Corporations Act 2001 – SECT 435C,
THE ADMINISTRATION of a company also END because
the Court orders, under section 447A or otherwise, that the administration is to end because the Court is satisfied that EITHER
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the company is SOLVENT (2)(a): or
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provisions of this Part are being ABUSED (2)(b); or
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for some other reason
The order can be made by shareholders (or their lawyers) as any other interested person – Under Section 447A (4)(f)
2 – In addition, under subsection (4)(b) Australia Corporations Act 2001 – SEC 439A,
In the 2nd Creditors Meeting, Administrator will need to make a recommendation whether the company to be wound up, return back to shareholders or DOCA.
Our argument in favour of returning the Arrium Australia business back to the shareholders after Moly-cop is sold is that
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Creditors will be BETTER OFF as the chance of a shortfall is less likely after returning the Arrium Australia company back to the shareholders as a profitable business with going concern.
Banks have no rights to call in unsecured lending which is not due and payable
We also challenge the actions of the lenders over the reckless, irresponsible unsecured lending. The lenders have no right to call in all their lending facilities as no breach of debt covenants is evident and the facilities are not due and payable.
Why liquidating a profitable Arrium Australia business
It is WRONG for the administrators KordaMentha to attempt selling off the remaining Arrium Australia as a profitable and going concern company at the expense of the shareholders.
The Arrium Australia business alone is worth over $3billion in book value. After all the cost cutting measures and governments assistance in terms of direct funding injection and anti-dumping policy support, the company is reportedly to be very profitable, even with the Whyalla operation, the underperforming part of the business, will be at least breakeven in 2016/17. The upward movement in iron ore and steel prices coupled with the lower interest rate environment as well as improving fundamentals of the Arrium business which should be enhancing profitability even more. In addition, the highly sought after mining consumable subsidiary Molycop will be sold for well over $1.5b reportedly and the proceeds from the sale alone will be more than sufficient to service the next trenches of loan repayment amounting up to $800m in 2017/18.
According to AFR media report, Morgan Stanley was hired to sell/recapitalise Arrium Australia for a enterprise value (EV) of up to $1B.
There is no basis for this alleged valuation which heavily undermined the real value and viability of the business. Since the actual and projected financials have not been made available to the shareholders as it would usually be, we have extracted the following details based on the past financial statements, prevailing iron ore and steel prices at around 10th August 2016, published and publicly available information:
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Arrium has $2 billion of accumulated tax losses which is worth around $600m alone to be carried forward further improving Arrium Australia bottom line for years to come.
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Whyalla Steelworks should be at least breakeven after the achieved cost saving and employee pay cut and the Steel EBITDA should be at an approximate annualised $225m with an assumed volumes increased of 5% as stated in the 2015 half year statements.
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Mining should be making at least $18 per ton given the increase in the iron ore price, labour cost cut, reduction of previous contracts and the ending of shipping contract savings from September 2016 onwards. Yearly production of 9 million tons will achieve a EBITDA of $167m.
For a business generating a total annualised EBITDA of around $400m (excl Molycop) with a cumulated tax benefits of $600m, there is no reasons Arrium Australia cannot continue with its current owners and the alleged EV of $1b is grossly
understating the real value and viability of the business.
Lack of Transparency of the Administration process
Administrator KordaMentha has successfully extended the 2nd creditors meeting for another 9 months until February 2017. However shareholders do not have reasonable level of visibility and understanding of
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The administrator’s professional cost incurred to date and the projection over the term of the administration.
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The actual and projected financials of the company. This is very important as we believe it will show the company is indeed very profitable and solvent in particular after Molycop is sold.
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The exact plan of the administration. Are they selling Molycop as well as Arrium Australia or just Molycop only? Is there a DOCA being considered? Have they seriously considered returning the company back to the shareholders? if not, then why not?
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Administrator’s relationship with the lenders. Are they working in arm’s length and impartial or with hidden agenda to the detriment of the shareholders?
Work with Shareholders constructively to build a strong and profitable company
We believe Arrium is an iconic Australian business which fulfills a very important strategic function in the Australian economy. A strong Arrium is good for all Australians by providing fair competition within the iron ore and steel industry while it remains under the ownership of a broad shareholding base. Giving control of Arrium to a competitor or overseas company could create a long term detrimental impact on the Australian economy. An effectively managed Arrium with the current vertically integrated business structure will provide long term benefits for all stakeholders.
Shareholders are also the stakeholders of the administration. KordaMentha has to act within the law as well as moral conscience in dealing with this matter as the shareholders should not be unfairly treated via transferring the great assets from the shareholders to the buyer. We should be actively engaged in the administration process and will be working constructively and collaboratively with all stakeholders including the governments, creditors and unions to develop a workable plan and management structure including electing a capable board of directors to lead the company to a successful future.
