Call for Independent Review in Arrium Administration
Increasing number of Arrium shareholders feel that the due process of law has not been appropriately observed and actioned by the Administrators for the voluntary administration of Arrium group of companies. Many believe that a company like Arrium, with surging profitability of over $400m EBITDA and properly managed workforce and cost structure, should never ever be sold to a foreign competitor.
Stubbornly pushing to sell off the nationally important assets to foreign trade buyer despite numerous DOCA and debt restructure proposals by the shareholders group long before the second creditors meeting and a separate proposal submitted by a local Australian company endorsed by the shareholders group, the Administrators are seen not acting in the best interest of stakeholders and Australia’s national interests.
Alternatives are available for the long term viability of Arrium Australia (AA). Sale of AA appears in the interest of the Administrators and its advisors, instead of the best interest of stakeholders, certainly not in the national interest. Shareholders group has proposed a Nyrstar Model recapitalisation plan but so far we have not received proper consideration or constructive response from the Administrators.
A local Australian company has made a proposal to commit a long term steel purchasing agreement for the full (or remaining) production capacity of Whyalla steelworks and offered an additional financing and technology assistance on behalf of their client. However the Administrators have not constructively responded to this proposal that is material to the survival of AA in the best interest of all stakeholders.
In the name of confidentiality, the Administrators have not reassessed viable alternatives after the sale of Molycop division and 8 months of profitable operation in a rising iron ore and steel market. Given the lack of scrutiny and transparency in this administration and our national interest is at stake, we call for an independent review in the Arrium administration (Petition: https://www.change.org/p/malcolm-turnbull-arrium-call-for-independent-review-protect-national-interest)
Background of the Proposals:
9th September 2016 -
ASU submitted a draft DOCA recapitalisation proposal requesting support by the major financing creditors and the governments. The communication ended when we were advised that the investigations are ongoing at this stage and all practical options to secure the best outcome for all stakeholders, including shareholders in Arrium Limited will be considered.
Then at the Second Creditors meeting, the Administrators proposed their own DOCA to grant themselves even more power in shifting assets between Arrium group of companies allowing them to continue the sale of key steel and mining assets and the subsequent liquidation of the holding company. Administrators also publicly said in the press that creditors will likely experience shortfall in their exposure when the company is sold and shareholders should not expect any return as a result.
It was ironic that the DOCA proposal submitted by ASU was exactly trying to address the likely shortfall to the creditors as well as the associated negative ramifications to jobs, workers’ conditions and national interests if the company is sold off to a foreign party. It was disappointing that the Administrators did not even consider and discuss the proposal seriously.
13th January 2017 -
ASU submitted a Debt Refinance/Restructure proposal directly to all the 4 major banks in Australia and key government politicians to request consideration of refinance and restructure of the outstanding financing debt as an alternative to sale. The proposal contains a comprehensive proposal highlights as well as detailed financial projections derived and based on publicly available information as well as the most recent steel and iron ore price assumptions. It is worth noting that despite numerous written requests, the Administrators have failed to provide high level financial information to ASU.
Due to strict confidentiality preventing the major creditors engaging with ASU directly, ASU was referred to the Administrators about our proposal. Having previously submitted similar proposals to the Administrators without any constructive and positive response, the current sale process of all Arrium steel and mining assets is to continue by the Administrators regardless.
14th March 2017 -
ASU received an urgent email from a local Australian company seeking our assistance to inform the major creditors and the governments an offer/proposal to commit a long term steel purchasing agreement for the full production capacity of Whyalla steelworks (or any remaining unutilised capacity) and with an additional financing and technology assistance, probably via a joint venture structure, to assist with the upgrade of Whyalla steelworks with the intention to support an orderly recapitalisation of the overall business instead of selling off assets to a foreign competitor.
The initial offer/proposal was submitted to the Administrators by the Australian company directly back in December 2016. However due to the lack of interest from the Administrators, the company has written to SA Premier Wetherill and SA Senator Xenophon to request urgent assistance to make sure all key creditors are given the opportunity to properly assess the offer/proposal before the sale of assets is finalised.
We ASU have subsequently written to key government politicians, major lenders and union officials advising the existence of such a proposal urging them to request the Administrators to formally assess and discuss the proposal with the creditors and workers without delay.
