Cameron England: End of the road for Arrium may not be far off

THE failure of the Arrium board to convince its debt holders to accept a rescue package this week is by no means the end of the road for the owner of the Whyalla steelworks. But you could probably see the end of that road not far off.

• SA Treasurer urges calm as Arrium fights debt storm

THE failure of the Arrium board to convince its debt holders to accept an, admittedly harsh, rescue package this week is by no means the end of the road for the owner of the Whyalla steelworks and mining operations.

But if you squint, you could probably see the end of that road not far off, and there will need to be some deft dealing this week and in the few short months before the end of the financial year to save the 3000 jobs at the Whyalla steelworks and mining operations.

Meanwhile Arrium’s workforce, and state and federal governments — unless they get the chequebook out — are relatively powerless to affect the outcome of the process.

It would be foolish to underestimate the gravity of the problem Arrium faces — it has $2.8 billion in debt, two out of three of its operating arms (both of the SA-based ones) are unprofitable, and it also reportedly owes another half a billion in employee obligations.

Then there is the cost of cleaning up the Whyalla sites should it leave.

But it must be remembered that Arrium has not yet defaulted on its loans. The April 5 deadline for the deal with US “vulture” capital fund GSO Capital Partners was a self-imposed deadline.

The company has said previously that any decisions to put one or both of the steelworks and mining operations into “care and maintenance” would be made by midyear.

The current meetings underway with the bank’s lenders, apparently lead by the big four Australian banks, owed an estimated $1 billion, could speed up this deadline.

But those lenders will be looking to salvage something from this mess Arrium’s management has got it into.

Hopefully the Whyalla operations, whose future is grim without either a recovery in iron ore prices or some sort of bailout for the steel operations, are part of this.

The Federal Government, soon to face an election in a state where industry has been bleeding, will certainly hope so.