Korda Mentha has dispensed with the services of Arrium’s company secretary, Mark Edler.
You know a voluntary administration (VA) is progressing – hopefully in the direction intended – when the company secretary is no longer needed.
At least that’s how Arrium’s VAs from Korda Mentha are spinning the departure of Mark Edler, with a spokesman confirming yesterday that there is: “No need to replace (the company secretary) at this stage of the process …. the sales campaign is underway with a view to selling before end of year.” Fair enough. One departs when one’s work is done.
ASIC records show Ontario-born Edler left the debt stricken-steel maker on July 29. This was the same day investment bank Morgan Stanley was confirmed as lead financial adviser for the expected sale or recapitalisation of Arrium Australia and one day after joint VA Janna Robertson briefed the company’s committee of creditors on the progress of said sale. Most likely a Kordas staffer will take over the company’s continuous disclosure obligations for now.
Curiously, Morgan Stanley has also been mentioned in dispatches around Moly-Cop, the solvent jewel in Arrium’s rusting crown. There’s talk it could win one of the co-lead mandates for the proposed initial public offer (IPO) of the mining consumables business, which the administrators are desperate to get over the line given Moly generates about 50 per cent of the Arrium Group’s earnings pre-ITDA.
Now winning a mandate on the Moly-Cop IPO would seem a fortuitous outcome for the American finance giant given it’s already secured the admittedly unglamorous but still rewarding Arrium Australia gig. It might even be described as a most perfect example of the squeaky wheel getting the oil, or, in this case, the creditor who refuses to abide by the standstill being in no way disadvantaged in the beauty pageant.
Let us go back to April 18. Those traditional allies the banks and the unions have ousted the Arrium board’s chosen administrators from Grant Thornton. Newly installed administrator Mark Mentha has hit the ground running and just as well.
A subsidiary of the finance behemoth – Morgan Stanley Bank NA – is point blank refusing to be part of a standstill agreement negotiated with Arrium’s 42 other lenders. Instead it’s commenced legal action in a US court to enforce its $US75 million debt. With Arnold Bloch Leibler’s restructuring guru Leon Zwier in his corner Mentha heads to the Federal Court. The deeds of cross guarantee binding most of Arrium’s entities in the event of an insolvency mean Moly-Cop’s IPO potential is at risk.
“Unless this Court grants the relief that we seek in the Originating Process, Morgan Stanley will enforce its rights against the Moly-Cop Entities,” Mentha said in his affidavit.
“This will likely trigger an uncontrolled cross-border insolvency of the Moly-Cop Entities that will result in a serious destruction of value to the going concern business of the Moly-Cop Entities as the Moly-Cop entities are unable to pay all the Arrium Lenders the amounts owed to them and the Moly-Cop Entities are unable to pay only Morgan Stanley and thereby prefer Morgan Stanley over all other Arrium Lenders.
“I am aware from confidential reports that have been provided by other experts in relation to the Arrium Group that the loss in value between a controlled sale or recapitalisation of the Moly-Cop Entities business and assets and a realisation through a cross-border insolvency process may be in excess of AUD $500 million,” he said. Enough coincidentally, to cover Arrium’s roughly half a billion dollars in as yet uncrystallised employee entitlements.
What followed that application on April 18 were 13 adjournments before the matter was dismissed without a hearing on July 22. A week later Morgan Stanley won the Arrium Australia mandate. Today we may learn if it’s won a piece of the Moly-Cop action too. Coincidence can be most indiscreet phenomenon.
See also: Grant Thornton Excoriated Over Arrium
With the change in fundamentals I believe it to be unnecessary to sell both Molycop and Arriums Australian businesses. With the rises in the price of iron ore and steel not to mention $300 million in costs stripped out of the business Arriums EBITDA should be in the area of $450-500 million. More than enough to service the banks UNSECURED LOANS. Something smells very fishy here.
I support the above Comment by Steven Dahlin. I too believe there is no need to sell the entire Arrium Business. The rise in the Price of Iron ore has boosted the earnings potential of the Businesses and also the Valuation of the Assets.
This reeks of Corporate fraud, it seems like the Shareholders are being Screwed because the Shares right now would be trading at a much higher price than what they closed at.
Why are you going to sell the business if it can repay what they borrowed under current climate. Doesn’t make sense to me. Return to shareholder and let it trade in the market and allow the business to pay its obligation to banks and other creditors.
Edward, remember that in an insolvency situation the company is being controlled so as to maximise returns to creditors, not shareholders and the priority creditors in this situation are Arrium’s employees. They would be owed more than half a billion dollars in entitlements if the company is placed into liquidation. That money would have to be paid by the Australian taxpayer though the Fair Entitlements Guarantee Scheme so the Govt and Korda Mentha are desperate to prevent liquidation. A sale is their best chance but it’s in no way guaranteed. That’s why the administrators are working so hard to strip costs out of the steel making business and smear as much lipstick on the pig as they can.
.PG “Most likely a Kordas staffer will take over the company’s continuous disclosure obligations for now.”
Peter, I hope Kordas are not charging for this service. As a long suffering shareholder I have not read one item of continuous disclosure relating to ARI released to the market since KM were appointed on 18 April.
PG “This was the same day investment bank Morgan Stanley was confirmed as lead financial adviser for the expected sale or recapitalisation of Arrium Australia and one day after joint VA Janna Robertson briefed the company’s committee of creditors on the progress of said sale.” Peter, do you have any suggestions as to how shareholders can gain access to information given to creditors committee at this briefing. Unfortunately KM seem to believe shareholders are mushrooms and should be kept in the dark about any financial aspects of Arrium post their appointment as VA.
Hello Chris, you can bet your life Korda Mentha will be charging for that service but remember that as the shares aren’t trading the obligations are diminished. As to your second point, unfortunately the minutes of the meetings of the administrators and Arrium’s Committee of Creditors are posted with ASIC, and I quote,as “short form minutes … given the sensitive and confidential nature of the matters being discussed in the committee meetings …., no objections were received by the Committee to this proposal”. Perhaps you could try contacting some of the CoC members? They include representatives from the Australian Workers Union and the Australian Council of Trade Unions, workers’ representative Steve Cook, all the major Australian banks, the South Australian and Commonwealth Governments, K&S Freighters, Bis Industries, a American-based note holders, Argentine bank BBVA and Lucas Group. Seems the only stakeholder not represented is the Arrium shareholder.