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"Long and difficult path": Govt warning as Arrium placed in administration

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Premier Jay Weatherill has warned of a “long and difficult” path for Whyalla, after its key employer, Arrium, was placed in voluntary administration today.

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Premier Jay Weatherill, in China on a trade delegation, released a statement this morning warning of the challenges ahead as Arrium’s workers faced another blow.

“This is the beginning of a long and difficult path forward for the Whyalla community,” Weatherill said.

“They have already had to endure very substantial job losses in both the mining and steelworks operations.

“I’ve spoken to the Prime Minister and we have asked our State Treasurer and Federal Industry Minister to continue to work closely together to secure Whyalla’s future.”

The debt-laden company that runs the Whyalla steelworks and a range of SA mining operations has appointed Grant Thornton as the administrators, with executive control to be transferred immediately.

The company employs 3000 people in South Australia and 7000 across the country.

“Our focus will be to stabilise current trading, maintain business as usual across the group’s affected operations, (and) identify ways to restore the performance of key business units,” Paul Billingham, managing partner of Grant Thornton’s financial advisory business said in a statement on Thursday.

Acting Premier John Rau and state Treasurer Tom Koutsantonis met with the administrators today and have more meetings scheduled, as the State Government grapples with how to prevent the collapse of the company’s operations.

In a statement to the ASX, Arrium said it had ceased discussions with the banks and had no choice but to go into administration.

“As previously announced, Arrium has been in discussions with its lenders (banks and noteholders) following the lenders’ rejection of the recapitalisation plan for Arrium involving GSO Capital Partners LP (on behalf of funds managed by it and its affiliates) that was announced on 22 February 2016,” the company said.

“These discussions have now ceased. After considering the available alternatives, in the current circumstances it has become clear to the board of Arrium that it has, unfortunately, been left with no option other than to place the Relevant Companies into voluntary administration in order to protect the interests of stakeholders.”

The announcement comes a day after Treasurer Tom Koutsantonis pleaded with the banks and the company to keep talks open rather than going down the administration route.

Arrium suspended trading in its shares yesterday – a move that Koutsantonis tried to paint as an opportunity to “take a breath’.

“What this decision today gives us is the opportunity for the banks, Arrium, the Commonwealth Government and the State Government to be at the table and be able to come up with a solution,” he said.

“The State Government wants everyone involved here to take a breath.”

His plea has been ignored, with 7000 Australian jobs in the balance.

Koutsantonis said today that he was disappointed by today’s developments, saying the “Australian banks have gotten what they wanted”.

“They were insistent on putting this company into administration,” he said.

“I am heartened by the Administrator’s words that it is business as usual at the plant and they have assured me that they are communicating this with the workers across Australia.

“Having made this decision, the banks have now accepted a broader responsibility than just maximising the financial outcome for them and other lenders.

“The South Australian Government expects to work closely with the administrators, the banks and the Commonwealth Government to give this business and the workers in Whyalla a viable future.”

He urged the banks to retain the administrator appointed today, citing the need for continuity.

He said the State Government had “significant funds ready to invest in the future operations of Arrium”, but warned the cost to the taxpayer would escalate if Arrium went under.

He had also contacted other state treasurers to discuss implications for their states.

“This is a national problem that will require a full Commonwealth response.”

He again urged calm, and tried to strike an optimistic note.

“There have been other iconic South Australian companies that have gone into administration and traded out of trouble.”

Koutsantonis said the underlying business was in good shape, with the steelworks’ kiln able to be used until 2030.

“This is about structural readjustment, not about propping up something that’s not working.”

SA Senator Nick Xenophon demanded a Federal Government commitment to “Australian steel being used in taxpayer funded infrastructure projects”.

“It just kills me to see this happening,” he told InDaily.

“Whyalla won’t survive if it loses 6000 jobs – it’s gone [and] I’m actually angry it’s come to this, because what’s happened to Arrium was a direct consequence of blinkered policy by successive Governments.”

He said using local steel would not only provide a direct economic benefit through jobs, but argued the cost of sustaining imported steel over the life of a project eliminated any upfront saving.

“If the Commonwealth adopted that [policy], it would give confidence for Arrium, its administrators and banks to say ‘ok, there’s real light at the end of the tunnel’… it’s not too late to do that,” he said.

Arrium runs a number of mining operations in South Australia, including the steelworks in Whyalla which is the industrial heart of the town and employs more than 1000 people. At its peak, the Whyalla steel industry employed 6000.

The axe has been hanging over the steelworks since last year, when Arrium warned it would have to mothball the operation unless it could cover a funding gap.

The problems escalated this week when Arrium revealed its lenders – which include Australia’s four major banks, several global banks and US bond holders – had rejected a rescue package from asset manager GSO Capital Partners that would have involved them taking a sharp haircut on their debt.

The company is in the red by more than $2 billion.

Federal industry minister Christopher Pyne said today the voluntary administration announcement was bad news in the short-term but that Arrium’s constituent parts might still have a bright future.

“Out of the ashes of Arrium a better phoenix might arise,” he told ABC 891.

He said Arrium’s key problem was debt – the underlying business was a good one.

Pyne urged people not to pessimistic, pointing to the government-underwritten survival of Port Pirie’s once-threatened Nyrstar smelter.

He said it was “business as usual” for Arrium workers in Whyalla, a message reiterated by acting Whyalla mayor Tom Antonio who said “the plant will still operate, people have still got their jobs”.

“Let’s make this clear, the steelworks has made a profit in the last six months. It (made) a $100 million profit. It’s not the steelworks that’s been the problem; it’s the mining,” he told ABC radio.

The Australian Workers’ Union said the steelworks “can and should stay open”.

“No matter what transpires under any new administrators, the principle that underpins it all must be that the interests of workers should be a primary consideration,” national secretary Scott McDine said.

State Opposition Leader Steven Marshall said Arrium’s announcement was “concerning but unsurprising”.

“The debt and operating problems facing Arrium have not crept up on the company,” he said.

“At this very difficult time my thoughts are with Arrium employees, their families and the broader Whyalla community. The workers at Arrium are not at fault here.

“The State and Federal governments must do everything they can to work with the appointed administrators to ensure there is a future for Arrium.”

SA Greens Senator Robert Simms urged the Governemnt to provide urgent mental health support to the Whyalla community as part of any plan to save the steel industry.

“During this challenging time for Whyalla, the Government needs to ensure that the community is getting all necessary mental health support,” Simms said.

“On Tuesday, the Senate inquiry in Whyalla heard evidence that there has been an increase in members of the community experiencing mental health issues. The Government needs to provide assistance that goes beyond workplace counselling services.”

– InDaily staff with AAP

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