Arrium announced to the ASX it had agreed to a recapitalisation plan which could see GSO provide up to $US927 million, or about $A1.3b.
If the plan is implemented, GSO will provide a six-year senior secured term loan of $US665m ($A924) with pro-rata rights to Arrium shareholders to raise $US262m ($A364m), fully underwritten by GSO.
“Arrium’s debt will be significantly reduced, allowing the company to retain its world-class mining consumables business which continues to perform well.”
Under the plan Arrium would issue warrants to GSO equivalent to 15 per cent of the company’s issued shares.
GSO will have the right to nominate up to two board members.
The threat of closure, or “mothballing”, has hung over Arrium’s Whyalla steelworks with a $100m cost cutting plan launched last year, resulting it the loss of hundreds of permanent jobs and contracting positions.
This week Arrium announced during its half-year financial results that a further $60m gap had been found.
SA Treasurer Tom Koutsantonis said taxpayers may have to bail out Arrium to keep the Whyalla steelworks going.
Arrium chairman Jerry Maycock said today the pressures on the business due to falling iron ore prices and cheaper steel imports being used on Australian projects had taken a toll.
“The last 18 months [have] been an extremely challenging time for the company and the board acknowledges the loss of shareholder value during this time,” he said.
“The fundamental priority now is to create a sustainable capital structure.
“The recapitalisation plan is designed to deliver increase equity and new long-term debt facilities.”
It would also provide funding “to use towards the turnaround or restructuring of our steel and mining businesses to make them more sustainable”.
Maycock said the recapitalisation plan was “the best option” available to Arrium.
“The recapitalisation would provide Arrium’s shareholders with the opportunity to participate through existing shareholding or further invest alongside GSO under the rights issue.”
Arrium managing director and CEO Andrew Robert said the plan provided confidence.
“We will have the balance sheet strength and business portfolio to underpin the long-term future of the company.”
GSO must receive approval from Arrium’s financiers to ensure the plan is implemented.
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