ARI (Arrium) : At Rock bottom, ore not?

[Snoopy]

2/ Arrium warned Wednesday that unless it can cut another $60m in costs out of Whyallla, on top of the $100m signalled last October and cut iron ore mining costs by 1/3, both operations will be shuttered.
(A decision will be made by mid year.)

As we all know a rather different decision has seen the company move into the hands of adminstrators. But KordaMentha are tightening the screws themselves.

http://www.whyallanewsonline.com.au/...ssing-pay-cut/

"A spokesperson for Arrium’s Administrator, KordaMentha, has confirmed that they are in discussions with Arrium’s OneWhyalla employees and representatives in relation to a pay reduction."

"The Administrators require a $25-30m reduction in annual labour cost across the mining and steelworks operations."

"The spokesperson said the pay reduction was one aspect of a broader cost-out strategy to ensure the OneWhyalla business, as part of Arrium Australia, presents as best as possible to market."

“We understand this will have an impact on each and every employee, their families and the entire Whyalla community, but it is essential and the right thing to do for the long-term success of the OneWhyalla business,” they said.

Knucklebusters (from the other channel) who was at the workers meeting sounds none too impressed.

"It is 17%, we have taken no cut at this stage (only staff have) and they are wanting 17% from us (1450 employees) we will also have to lock in a new EA for 3 years stating no pay rises for this term. Arrium will be no longer and will be put up for sale at the end of this month. KM want our decision next week for a sign off the following week. They can get stuffed in my opinion, KM can't even guarantee a sale and have told us today it will shutdown in December if there is no interest from a buyer(s), So f**k it we may as well earn what we are earning now and get our redundancy payout."

SNOOPY

[Snoopy]

Nevertheless the expectation that Whyalla was a dead duck by the board ended up being sufficient to tip the whole company (Molycop excepted) into voluntary administration. I honestly thought that the board was intending to save Whyalla. Reading this wrongly was a very costly mistake on my part :-(.

The lesson to learn: Don't always assume that a business in difficulty will be a going concern when analysing the accounts!

When you make a big loss, it is usually best to 'learn your lesson' and move on. However, I do find it hard to keep away from the griping of fellow shareholders who cannot let this one go.

'Boges' posted on 22nd July on the other channel the following:

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The Arrium shareholders who chose to invest in Arrium in the $754 million rights issue in October/November 2014 at 48 cents may well have their day in court with this goose if it later transpires there was inadequate disclosures made - esp. pertaining to the closure costs and ongoing costs of Southern Iron - which was closed only 3 months later.

It raises suspicions of what everybody is now waking up to - that those funds were not used to pay down the gross debt level of Arrium (as the grinning idiot chairman claimed it was in the prospectus) but rather the closure of Southern Iron if iron ore price sank below US$73 per tonne.

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It does seem odd that such a substantial risk was not mentioned in the rights issue prospectus. I am not trying to shift the blame for my poor investment decision onto someone else. As I have previously shown, there were sufficient disclosures over the years to work out what the effect of closing Whyalla would be.

Of course it is hard to know what then Chairman Smedley could have done as an alternative. Smedley made an extra institutional placement of shares at the time of the rights issue. And you couldn't argue that the rights issue at 48c was priced too low, when so much of it ended up in the hands of the underwriters. So Smedley definitely raised the most cash he could at the time. However if he had been more forthright on the risk of the Southern Iron Closure, investors such as myself may have used rather different post rights issue purchase tactics - knowing that Arrium was $600m short, even after the substantial capital. raising!

SNOOPY

[Snoopy]

Meanwhile Deutsche Bank is to sell Molycop (maybe through an IPO).

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SYDNEY, June 3 (Reuters) - Administrators to Arrium (ARI) will appoint Deutsche Bank to run a sale process for the troubled steelmaker's Moly-Cop grinding balls and wire rope business, a spokesman for the administrators said on Friday.

Moly-Cop, which makes steel balls to grind ore, among other items, operates mostly in the United States and Latin America.

The decision to sell Moly-Cop is part of planned recapitalisation and sale of Arrium's assets, which also include steel works and distribution businesses in Australia.

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http://www.sbs.com.au/news/article/2...old-16-billion

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Arrium's administrators have agreed to sell its Moly-Cop grinding media business for $1.6 billion, with proceeds to be used to cut the company's massive debt.

Moly-Cop - the world's largest supplier of grinding media used in mining and construction - will be acquired by US private equity firm American Industrial Partners for $US1.23 billion ($A1.64 billion).

"The sale is a great step forward for all creditors of Arrium. It is probably $300 million to $400 million more than what was offered last year," adminstrator Mark Korda of KordaMentha told reporters after a creditors meeting in Sydney.

Proceeds from the sale of the profitable division, which was not under administration, will be used to reduce Arrium's total debt of $2.8 billion.

The sale is likely to be finalised by January.

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SNOOPY

[Snoopy]

Copy of a letter from a member of Arrium Shareholders United (ASU)

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Dear Daniel,

Firstly, congratulations on your promotion to one's of the nation's pivotal trade union roles.

I am a member of Arrium Shareholders United (ASU), a group of 420 members representing 160 million shares. Our members are predominantly mum and dad investors, many are current employees of Arrium/Onesteel and are also union members and shareholders.

Our motivation is to keep Arrium Australian owned, protect Australian jobs and employees’ terms & conditions of employment and maintain shareholder value.

We are highly concerned that KordaMentha are continuing to promote a sale process of Arrium Australia, despite highly favorable market conditions that translate into a highly profitable last 6 months, with projections for a bumper 2017.

It defies any rationale argument that Arrium remains under a DOCA, that KordaMentha invoices a cool 1 million a week to administer.

Furthermore; Morgan Stanley will pocket a 100 million in fees for managing a totally unnecessary sale process that will result in another Australian icon being sold overseas.

We are aware that at the start of Arrium's administration your union's key focus was to ensure there was sufficient funds available for employee entitlements if bankruptcy could not be avoided.

With the vastly improved business viability of Arrium Australia, the daily feedback we are receiving from union members across the country is that they now seek a strategic approach from their union leaders to ensure Arrium jobs and working conditions are protected. That Arrium Australia is restructured, kept Australian owned and relisted on the ASX.

Your Arrium union members read newspapers and speculate daily on their employment futures. They are aware if Liberty House buys Arrium Australia, there is a strong likelihood of support functions being shipped offshore resulting in large numbers of redundancies. Furthermore; given Liberty House's dubious corporate governance track record they are likely to renegotiate your EA's as soon as it is legally possible, stripping out hard fought terms and conditions.

The alternative, is also not a positive scenario for Arrium union members if Bluescope "cherry pick" and buy key East Coast Arrium assets. This would also result in widespread redundancies with duplicate business units closed. Also, how would Whyalla stand alone under this arrangement?

Furthermore; it is estimated that more than 50 percent of Arrium full time employees/union members are shareholders that risk having their share scheme savings being wiped out under the current DOCA arrangement.

The combined leadership of Arrium/Onesteel unions are in a strong position to stop the sale of Arrium Australia and encourage the key lenders to refinance the existing debt which can easily be serviced. Your position on the creditors committee is pivotal and has the potential to influence the big 4 banks to adopt this approach. A new board could then be formed with AWU representation.

We have been extremely proactive communicating with lenders, ASIC, KordaMentha, politicians and the media with mixed results, but what would really “tip the scales” is the strong support from unions and its rank and file members, to not only prevent the sale of Arrium Australia but to participate in the planning of its future.

We would be delighted to meet with you to discuss our plans and ideas.

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It is exasperating that a now fundamentally profitable company, whose debt has been slashed, is not being returned to the original shareholders.

SNOOPY

[Snoopy]

Insiders are buying. From the AFR dated 23rd September:

"Arrium directors Peter Nankervis and Graham Smorgon have joined their incoming chairman Jerry Maycock in snapping up Arrium stock after a mass selloff sparked by the steel and mining group’s $754 million equity raising."

From "The Goondiwindi Argus" 27 Oct 2016

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Arrium’s administrators have uncovered evidence that suggests the company may have traded while insolvent.

According to a report sent out to creditors last week, KordaMentha are looking into a ‘number of transactions’ made by Arrium before the company found itself in a crisis.

"There is evidence which warrants further investigation as it suggests that the Arrium group of companies may have traded whilst insolvent for a period," it said.

"We are not in a position to provide final comments about potential offences that may have been committed or amounts of money that may be recoverable in the event any of the Arrium Group of companies are placed into liquidation”.

”There is still a significant amount of investigative work to be undertaken in respect to potential recoveries available to a liquidator.”

KordaMentha is required to investigate the business and financial affairs of Arrium under the Corporations Act, and their report says it is possible the company breached the act through their actions.

“The directors may not have acted in the interests of the Arrium Group Companies to which they were appointed,” the report stated.

“Ultimately a determination of whether the directors have breached these duties will be made by a court.

“We continue to investigate whether finance facilities were continued to be drawn down either when the Arrium Group Companies were insolvent or when they were aware of that the GSO proposal, if accepted, would result in the Financiers receiving a substantial discount on the face value of the debt advanced.

“The evidence to establish any claims will likely need to be tested by public examination of the relevant directors and advisers by a liquidator.”

As part of the report, KordaMentha stated that Arrium undertook a strategic review in early 2015 that revealed there were some concerns about an ability to pay or refinance debt.

The company’s second creditors' meeting is scheduled to be held on Friday, November 4.

Arrium also announced last week that the last of its directors prior to the company's administration have now resigned, effective immediately.

The resignations include: Chairman Jerry Maycock and non-executive directors R. Bryan Davis, Denise Goldsworthy, Peter Nankervis, Doug Ritchie and Rosemary Warnock.

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SNOOPY

[Snoopy]

http://www.sbs.com.au/news/article/2...old-16-billion

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Arrium's administrators have agreed to sell its Moly-Cop grinding media business for $1.6 billion, with proceeds to be used to cut the company's massive debt.

Moly-Cop - the world's largest supplier of grinding media used in mining and construction - will be acquired by US private equity firm American Industrial Partners for $US1.23 billion ($A1.64 billion).

"The sale is a great step forward for all creditors of Arrium. It is probably $300 million to $400 million more than what was offered last year," adminstrator Mark Korda of KordaMentha told reporters after a creditors meeting in Sydney.

Proceeds from the sale of the profitable division, which was not under administration, will be used to reduce Arrium's total debt of $2.8 billion.

The sale is likely to be finalised by January.

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The rest of Arrium is now approaching the block. Key points from the AFR update below:

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"British industrial company Liberty House and stablemate SIMEC have hired a key executive from European metals company Nyrstar to lead its buyout bid for the Arrium Australia business which includes the Whyalla steelworks."

<snip>

"other Australian assets being sold off by Arrium administrators KordaMentha include a large steel distribution operation and mini-mill facilities on the eastern seaboard of Australia. KordaMentha is in the final stages of the sale process with Liberty House/SIMEC one of two final bidders, the other being an entity led by South Korea's POSCO."

<snip>

"Mr Morley said Liberty and SIMEC had a bold vision for a vertically integrated and sustainable steel business that encompassed mining, liquid metal production, engineering and distribution. It would also include metal recycling and the use of renewable energy.

"It's an exciting strategy that they are already pursuing successfully in the United Kingdom," he said."

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SNOOPY

[Snoopy]

"other Australian assets being sold off by Arrium administrators KordaMentha include a large steel distribution operation and mini-mill facilities on the eastern seaboard of Australia. KordaMentha is in the final stages of the sale process with Liberty House/SIMEC one of two final bidders, the other being an entity led by South Korea's POSCO."

From the 15th June KordaMentha media release:

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KordaMentha Restructuring today announced it had chosen a Korean consortium as the preferred bidder for the Arrium group of companies. The consortium is headed by Newlake Alliance Management and JB Asset Management and is supported by the POSCO company. KordaMentha, the Deed Administrators for Arrium, and investment bank Morgan Stanley, which managed the sale process, will work with the consortium to finalise the sale contract as soon as possible. This would include discussions with the Federal and South Australian governments on investments in the future of Arrium’s operations in Whyalla. The final sale is subject to approval by the Committee of Creditors and the Foreign Investment Review Board.

Mark Mentha said: “After a 14-month administration and a nine-month sale process, we are now an important step closer to providing certainty to employees, creditors, suppliers, customers and the Whyalla community." “We thank all those people for their patience and support during one of Australia’s most complex administrations.”

Mr Mentha said he could not provide further details yet because of commercial confidentiality. He thanked the UK-based Liberty House group for participating in the sale process.
The Korean consortium and Liberty House were the two short-listed bidders who submitted bids for the entire Arrium group, including Whyalla.

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SNOOPY

[Joshuatree]

"providing certainty to employees, creditors, suppliers, customers and the Whyalla community."

Shareholders excluded; game set and match. Well at least my trading portfolio will look better when i remove ARI

[Snoopy]

From the 15th June KordaMentha media release:

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KordaMentha Restructuring today announced it had chosen a Korean consortium as the preferred bidder for the Arrium group of companies.

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What sort of a bidding process was this? After submitting the 'winning' bid, the Korean consortium has now been shafted!

Arrium shareholders could lose nearly $3bn from sale to UK’s GFG Alliance
Renato Castello, The Advertiser July 6, 2017 11:54pm

Saving Whyalla turns into petty politics. Thousands of jobs saved in Whyalla as Arrium sold Arrium’s buyer looks to renewable power, new technology and exports. Meet the British billionaire who has saved Whyalla

ARRIUM’S 80,000 largely mum and dad shareholders could lose nearly $3 billion from the foreign takeover of the company’s Whyalla operations under “conservative” estimates by aggrieved investors.

While workers and the community celebrated an end to the uncertainty hanging over the city, shareholders fear they will see no return under the sale of the mining and steel maker to UK’s GFG Alliance controlled by Sanjeev Gupta.

Mr Gupta has vowed none of the 2400 jobs in Whyalla will go, but Arrium Shareholders United spokesman Robert Dadge said the sale could cripple the retirement funds of investors if ownership moves offshore.

“This is a 100-year-old company of strategic importance that’s now being sold to an Indian family that have their headquarters in London, who have said openly that they may list it on the London Stock Exchange — where does that leave shareholders,” said the former Arrium worker, who represents 700 members, who own 200 million shares.

“What about real owners of the business that have taken a risk of investing,” he asked.

Mr Dadge, who has $60,000 invested in Arrium, said he was “thrilled” that uncertainty regarding Whyalla’s future had been resolved after 15 months of voluntary administration with GFG buying the Arrium operations for an undisclosed price. But he was “bitterly disappointed” that none of the “big four banks” could have refinanced Arrium’s debt paving the way for potential relisting on the ASX.

“Whyalla would still have been saved and 80,000 mum and dad investors would not have the potential of their retirement nest egg wiped out, in a win-win for all parties,” Mr Dadge said.

Arrium’s shares crashed to 2.2c in April last year just before the company was placed in a trading halt after it collapsed, owing $4 billion.

Arrium was spun out of BHP Billiton as OneSteel in 2000 and at its peak in 2009 its share price climbed above $6. Mr Dadge said he conservatively estimated the potential shareholder losses at $2.94 billion — based on an investor paying an average $1 per share.

Under a voluntary administration shareholders are not guaranteed any return from the liquidation or sale of the company and don’t have a vote on its future. Arrium’s Committee of Creditors which will meet next week to give the expected final approval for the deal after federal Treasurer Scott Morrison and the Foreign Investment Review Board signed off on the sale on Thursday. Federal Industry Minister Arthur Sinodinos will be in Whyalla on Friday to meet with the council and Arrium representatives.

On Thursday, Premier Jay Weatherill and Treasurer Tom Koutsantonis met with GFG Alliance representatives, including future Arrium chief executive officer Michael Morley. The State Government has contributed $50 million to the sale, for which it hopes to gain third-party access to Whyalla’s port. Mr Weatherill said there was “no request” for further government resources.

“Their (GFG’s) ambition is to grow the business in Whyalla. To employ more people, to invest and create a long-term future for the steelworks.

Mr Morley and Mr Gupta are expected to travel to Whyalla next week.

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SNOOPY

[Snoopy]

What sort of a bidding process was this? After submitting the 'winning' bid, the Korean consortium has now been shafted!

Arrium shareholders could lose nearly $3bn from sale to UK’s GFG Alliance

More information in the AFR of 7th July answers my question.

"It was third time lucky for Liberty House and its parent company SIMEC around 8pm on Tuesday 4th July when the group bidding vehicle GFG Alliance lobbed bid number three through to Arrium administrators Korda Mentha at their Melbourne office after a roller coaster ride in the sales process.

This one eventually clinched the deal elbowing aside a private Korean equity consortium lead by Newlake Alliance , which left the door open the previous Friday night when it lost exclusive bidder status , after it became tangled in financing issues surrounding its own bid, and nervousness in federal government circles about a $400m taxpayer funding deal it was seeking.

<snip>

While some in the South Australian government in particular wanted a new dawn at Whyalla with a big Korean operator involved, in the end it was certainty, a short time frame for delivery and residual fears that the Korean plan simply had too much 'blue sky' that brought GFG the keys to Arrium."

SNOOPY