Arrium’s Moly-Cop gathers pace for ASX float

Arrium’s coveted media grinding business, Moly-Cop, has drawn a fresh set of domestic and international lenders ahead of its potential debut on the Australian Securities Exchange later this year, heightening expectations administrators Korda Mentha will opt to float the assets rather than pursue a trade sale.

DataRoom has established that National Australia Bank and Westpac are working on a deal on a new debt structure for a listed Moly-Cop, as are French giant BNP Paribas and Argentinian bank BBVA Banco Frances. According to sources close to the negotiations, the four institutions have pledged $US250 million ($326m) in loans to the business, which makes steel balls to grind ore, among other items, and operates mostly in the US and Latin America.

If a run at the boards proves successful, the revised loan structure will leave Moly-Cop with a comparatively low gearing ratio of 1.5 to 2 times earnings.

While Korda Mentha is intent on rallying interest from potential private equity buyers and trade buyers, at the same time as it pursues an IPO option, the display of support from lenders as well as potential investors has prompted predictions the business will wind up a listed entity.

Joint lead managers to the mooted float, Macquarie Capital and UBS, are preparing to brief analysts next week, with the publication of a prospectus expected at the end of next month. A raise of $US1 billion will follow at the end of November if the IPO proves the most valuable option.

Moly-Cop has long been regarded as the best performing division within the troubled steel group, and is forecast to generate earnings before interest and tax of $200m in the 2017 financial year. But investors stressed the valuation multiples are likely to look less appealing if based on net profit given the business high tax burden — due mainly to its operations in Latin America.