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Category: Business, Economics and Finance / Steel

Arrium gets cash injection to pay off debt

Monday, 22 Feb 2016 09:37:51

Arrium is set for a financial injection under an agreement with GSO Capital Partners. (ABC News: Nick Harmsen)

Embattled steelmaker and miner Arrium Limited has entered an agreement with a third party to recapitalise its business structure.

Key points:

  • A recapitalisation plan could provide Arrium with funding primarily to retire outstanding debt
  • A secured stand-by loan will provide the company with more liquidity while recapitalisation plan is progressed
  • Arrium's chairman says the past 18 months have been extremely challenging for the steelmaker

The company has been struggling with low commodity prices and last week said it may need to mothball its Whyalla steelworks after returning a half-year loss of $236 million.

It flagged that more than 1,000 jobs were at risk.

It said it was now working with asset management company GSO Capital Partners to restructure and reduce debt.

If the plan is implemented, GSO will lend Arrium $924 million over six years and offer pro-rata right issues to Arrium's shareholders to raise about $364 million.

GSO would be able to nominate up to two representatives to the Arrium board.

The plan is subject to a number of conditions, including company and bank approvals.

GSO is described as a "leading alternative asset manager" that has more than $US79 billion in assets.

Arrium's chairman Jerry Maycock described the past 18 months as an "extremely challenging time" for the company.

"The recapitalisation plan is designed to deliver increased equity and new long-term debt facilities," he said.

"It would allow the company to retain its world-class mining consumable business which is performing well.

"It would also provide funding to use towards the turnaround or restructuring of our steel and mining businesses to make them more sustainable."

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