Tuesday, April 19, 2016

Arrium administrator says no redundancies yet for Whyalla steelworks

Less than a week into Australia's most complex corporate restructure, the administrator to the failed iron and steel firm Arrium says the company's future hangs on the fate of its Whyalla steel works.

The insolvency firm KordaMentha says while many of Arrium's businesses are in "good shape", most are in some way exposed to the survival of Whyalla operation

But Arrium administrator Mark Mentha of KordaMentha is cautiously optimistic and told theABC's AM program that no redundancies are planned for Whyalla as yet despite the debt burden.

"We've not undertaken and have any planned redundancies at this point. We are going sort of planned, methodical, strategic approach," Mr Mentha said.

"When we are more informed we'll be in a better picture to be able to talk about what are the next steps in moving forward at Whyalla."

KordaMentha, best known for its administration of the airline Ansett fifteen years ago, will host the first meeting of Arrium creditors in Sydney today with a webcast going to Whyalla.

Mr Mentha will creditors that the turnaround of the Whyalla steel operation is the lynchpin of any restructure of the overall Arrium business.

"It's the front end of the business where we dig the ore out of the ground and feed that into the mill starts in the whole steel process," Mr Mentha told AM.

"And in Whyalla particular many of the businesses in that town are in some way connected to the steel works. So it's a business that is very much interwoven into the fabric of that community and the state of South Australia.

"The social disruption aspect is very large in the minds of everyone. So as we said at the outset we'll leave no stone unturned to find a way to maintain all of the businesses this group is a growing concern."

KordaMentha was appointed as Arrium administrator last week after a revolt by major banks and the Australian Workers Union forced the sacking of insolvency firm Grant Thornton.

Mr Mentha was forced to take the US bank Morgan Stanley to the Federal Court yesterday after it moved at the weekend to call in a US$75 million loan to Arrium's Moly Cop business.

But Mr Mentha said the Federal Court action means Morgan Stanley will now agree to work with other major banks with the aim of restructuring Arrium.

It was a matter that the administrators and with the assistants of the court, have the ability to bind all creditors.

And that was a process that we were using yesterday to capture a US bank that was originally outside the agreement that we've reached with all the other banks across the Arrium group.

"Based on yesterday's representations we are confident that Morgan Stanley are acting in good faith," Mr Mentha said.

The Arrium restructure is likely to feature in the coming election campaign given the likely poll date of July 2.

But Mr Mentha says that rather than being a distraction, the election campaign could work in Arrium's favour.

"I have no doubt that all that political parties are motivated to ensure that Arrium is better downed so for us we have to have our plan in place before July 2."

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