by Louise Thomson

It was interesting that the conglomerate US Bank Morgan Stanley is significantly behind the problems of Arrium.

Morgan Stanley, according to the reports, (see SMH April 18 article by Sarah Danckert) has filed action in the Delaware Chancery Court seeking orders that Arrium and its subsidiary companies repay a $US75.4 million ($A97.6 million) credit facility the US bank provided in 2013.

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If the bid to restrain Morgan Stanley fails, there is a risk the rescue deal between the lenders and the Australian Workers Union could be frustrated by ongoing legal action and the expected restructure of Arrium and its businesses. 

Morgan Stanley is also seeking orders to prevent Arrium and its subsidiaries from transferring assets out of the US, according to reports in the US.

Morgan Stanley's loan is linked to Arrium's US business including its successful ore grinding business Moly-Cop which is the most profitable part of Arrium's business and central to the rescue plan for the collapsed group, American legal publication Law360 reports. 

Moly-Cop has operations in Australia, the US, Canada, Chile, Indonesia, Peru and Mexico. 

The financing brings in many of the Arrium companies by way of direct borrowing and cross-guarantees. The group consists of 94 entities.

To give you an idea about the numbers of businesses and people directly ‘on the hook’ with for what is believed to be approximately $4 billion. There are some 8,300 employees, the four big banks,  noteholders in the US, Morgan Stanley,  Spanish bank Banco Bilbao Vizcaya Argentaria (BBVA) and 10,000 suppliers.

Today the news is all about deflecting the issues, as the Administrator makes it known that he would ‘love to win ..’ contracts to supply steel to the navy for its two new submarines and patrol boats worth $90 billion.  This is directly about the jobs in the Whyalla blast furnace and South Australian iron ore operations. How assurances can be made, let alone contracts, without the appointment of a builder and the location of the build is nothing short of playing to the union who helped appoint him.

What is both ironic and sad is that Morgan Stanley was the beneficiary of a reported US$107.3 billion bailout by the US Federal Reserve during the GFC (reported 2009 figures) that amounted to free credit. It is alleged to be the largest provided to any of the US banks.

The complexity of this business, the serious fall in both iron ore price and the steel price and the centralisation and shrinking of world steel making makes this difficult re-structure.

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