PERTH (miningweekly.com) – The federal government has come out in support of struggling steel and iron-ore company Arrium after lenders rejected a recapitalisation plan for the company.

Arrium in February secured $927-million in funding from GSO Capital Partners as part of attempts to restructure and level its debt in a low iron-ore price environment.

The funding was to comprise a six-year senior secured term loan of about $665-million and a fully underwritten renounceable prorata rights issue to Arrium shareholders aimed at raising about $262-million.

As part of the recapitalisation, Arrium would have also sought to obtain secured working capital facilities of about A$500-million.

Reducing its debt of about $2-billion would allow Arrium to retain its mining consumables business, while allowing for the restructure of the steel and mining business units to make them more sustainable.

Local newspapers report that the lenders have been angered by a lack of consultation from Arrium ahead of the announcement of the GSO offer in February. The proposed package would have given lenders about 55c in the dollar owed.

With the lenders voting against the recapitalisation plan, Arrium has gone into a trading halt while it considers its options.

In the meantime, Industry, Innovation and Science Minister Christopher Pyne said on Tuesday that the government would continue its work on policy levers to give Arrium “every opportunity to transition in this difficult global market”.

Pyne pointed out that the government had already reformed anti-dumping laws to address the issue of foreign competition, while bringing forward the purchase of 72 000 t of steel for the Adelaide-Tarcoola rail line.

Further, the government had also repealed the carbon tax and provided a 100% exemption for emissions intensive, trade exposed industries from the Renewable Energy Target, and had secured an agreement from the state Ministers on the Council of Australian Governments Industry and Skills council to examine the opportunities and challenges of government procurement policies.

“It takes a whole-of-government effort; with state governments responsible for most major construction projects they have a critical role in ensuring the use of local products to support Australian industry.

“The [Malcolm] Turnbull government will continue to work closely with the South Australian state government. This is an uncertain time for steelworkers in Whyalla and the Australian government stands ready to assist,” Pyne said.

South Australian Treasurer Tom Koutsantonis said the state’s Steel Task Force had been speaking to all of the parties involved in the negotiations about Arrium’s future to ensure that Whyalla continued to operate as a steel producer.

“The workforce at Arrium and their wellbeing is our number-one priority,” Koutsantonis said.

“Both the state and federal governments are working diligently to resolve the current situation so that the steel works at Whyalla and the associated mines can continue to operate.”

Koutsantonis noted that the company employed about 7 000 people across Australia and 22 000 around the world, and was a vital national asset.

“Our target is to secure the steel works as a continuing operation to provide a period of certainty to achieve improved efficiencies and new investment. The future of Arrium is still to be decided. The company, its creditors and potential financiers are still locked in negotiations to resolve the company’s financial situation.”

“This is a complicated situation and there is no simple answer to the challenges that need to be resolved, but we are all working to ensure that securing a future for Whyalla remains front and centre of our efforts,” Koutsantonis said.