Terry McCrann: Good news for all, even for the banks

THE sale — more pointedly, the purchase — of the Arrium steel group is one of those rare all-round good-news stories, writes Terry McCrann.

Whyalla would have been turned into a ghost town if not for the sale of the Arrium steel group.

THE sale — more pointedly, the purchase — of the Arrium steel group is one of those rare all-round good-news stories.

It’s obviously good news for the 5500 people who will continue to have jobs — indeed, now actually more secure jobs than they might have thought they had back even before the company’s finances went to custard.

It’s also good news for all the businesses and their workers which do business with Arrium and its various operations, whether as suppliers or customers, and not just in Whyalla but around the country.

It’s good news — indeed the best news — for Whyalla, which would have been turned into a ghost town otherwise (albeit, perhaps only the first of many in Jay Weather-ill and Tom Koutsantonis’s back-to-a 19th century-future state).

It is therefore good news for the state and also — directly and undeservedly, because the purchase was no thanks to them — those two very same pollies. But it is also good news for the country overall, that this business has a future in a global context.

That’s the key point and why I stressed that it was the purchase side of the deal that is the foundation of the good news.

A sale in isolation wouldn’t have guaranteed a future: the generic buyer could be acquiring it for the corporate equivalent of scrap.

South Australian Premier Jay Weatherill. Picture: AAP

This buyer is buying to keep the business, well, in business — and shock catastrophes aside, keep it in business at least well into the medium, term. That’s say at least seven to 10 years.

You don’t outlay $1.5 billion-plus, maybe even $2 billion-plus, as this buyer is doing, and outlay it in the way it has — buying the lot — unless you intend to run the business. This buyer intends to do exactly that and, critically, this buyer knows exactly what it is doing.

THE key thing to understand is that the buyer is not just spending $1 billion-plus — the price has not yet been disclosed (it will be) — to buy Arrium, it will also need to pump in another $500 million or so, and then counting, to recapitalise the business.

That’s the real commitment to at least that medium term future.

So if it’s paying the banks $1 billion, it’s committing to at least $1.5 billion. If it’s paying them $1.5 billion, it’s committing to $2 billion-plus.

The only people it is not good news for are the former Arrium shareholders. They will get zip, although the losses they will make on their shares will at least be formalised and finalised for tax claim purposes.

Furthermore, they didn’t lose their money yesterday. It went, instantly and completely, 15 months ago when Arrium went belly-up; so in a bizarre sense, now that they can claim their tax loss it’s sort of a ‘good news’ story even for them.

Those who think ‘banks are bastards’ will see it as ‘good news,’ because the banks will lose some money. They are owed $2.8 billion. They won’t be getting anywhere near 100c in the dollar back.

However, it’s actually even a ‘good news’ story for them compared with what they were looking at when it all blew up. They could very well have faced losing closer to all of that 100c in the dollar.

Crucially, the deal is a done deal. It is subject to only two conditions.

The first is creditor approval: they won’t just approve it, they’ll snatch it. The second is FIRB, foreign takeovers. Again, the treasurer will stamp ‘yes’ on the positive recommendation from FIRB the moment it hits his desk; maybe even while it’s in mid-air heading for his desk.

Apple co-founder Steve Jobs launched the first iPhone.

MEDIA: IT AIN’T 1990 REPLAYED

SPEAKING to someone who in another life played a central role in the extraordinary turnover in ownership of more than one of the major media companies at the end of the 1980s, might make one think this is 1990 redux.

It is not.

Back then — when the internet was in its infancy; mobile phones were, almost literally, bricks; and the iPhone was still at least a dozen years away from becoming even the first glint in the eye of the, now, late Steve Jobs — ownership of every one of the three free-to-air TV networks and two of the three biggest print media groups would change hands.

In the case of all three networks, change hands more than once; and so also with one of the two print groups which happened to be called John Fairfax then and Fairfax Media now.

The key difference — as a consequence, obviously, of the momentous changes that have taken place, encapsulated in the ‘six horsemen of the traditional media apocalypse:’ Amazon, Google, Facebook, RealEstate dotcom, CarSales dotcom and Seek dotcom (all non-existent in 1990) — were that then there were plenty of buyers.

Now there are none or almost none. We have two major media groups up for sale; nobody wants to buy one of them — Fairfax; and ‘somebody’ only half wants to buy the other — Ten.

That’s to say nobody wants to buy the Fairfax media business. The two Wall St mainchancers were after the Domain advertising business and they were trying to work out how much the actual media operation would cost them to run and eventually close.

Similarly with Ten: no-one’s going to lay out money to buy the Ten equity and assume the liability for existing and future — bigger — debt. They could have walked in the door anytime in the past three years and found willing sellers able to deliver them 50 per cent of the capital.

The only buyers are the two debtors (Lachlan Murdoch and Bruce Gordon) and perhaps a mainchancer that could find a way to pay off the debt.

Originally published as Terry McCrann: Good news for all, even for the banks