I refer to a May 2015 post, “GIC investing our CPF using ‘tikam tikam’ model, based on hope”, where I had highlighted “Arrium Ltd”, an Australian company with business interests in mining, mining consumables and steel.
Sadly, Arrium recently went into Voluntary Administration in April and the chances of shareholders getting back a single cent is as good as NIL. (see email from Arrium Ltd Administrators below post **, thanks to Steven Dahlin)
Last year, I had estimated the unrealised loss of more than A$300 million based on GIC’s 241 million Arrium shares trading at A$0.18.
(Instead of cutting loss, as Allan Gray Australia Pty Ltd, Arrium’s then largest investor did, GIC increased its shareholding by another 34 million shares. Even Highlere, then 3rd largest shareholder, had trimmed its shareholding.)
Based on GIC’s increased shareholding of 274 million shares which are now worthless, it is likely that GIC has lost more than A$400 million on behalf of CPF members and taxpayers.
Just how many “Arriums” are there in GIC’s books will never be known. But rest assured, judging from GIC’s recklessness, many of our CPF investments are in ICU.
Email from Arrium Administrators
24 August 2016
Arrium Limited (Administrators Appointed) (‘Arrium’)
Thank you for your email of 19 August 2016.
The Arrium companies were placed into Voluntary Administration April 2016 because they were considered unable to meet their debts when they became due. Those debts included repayments and other obligations towards about $4 billion of debt. That position remains unchanged, even though some parts of Arrium may be trading profitably at an operational level. The cash generated from operations is not enough to service the debts. The difference under Administration is that debts are frozen while the Administrators try to find a future for the company.
Our statutory role is to act in the interests of creditors as a whole and to maximise the chances of a company – or as much as possible of its business – continuing in existence. The Administrators explored all options before embarking on the current strategy described in our bulletin of 4 July 2016 (see http://www.kordamentha.com). This was after consultations with the Committee of Creditors elected at the First Meeting of Creditors. Alternative strategies, in our view, would not have helped achieve our obligations and would have exposed the Arrium group of companies to alternatives that may not have been in the interests of creditors as a whole.
Under insolvency law, shareholders are not entitled to participate in creditors’ meetings and rank behind employees and unsecured creditors and other parties owed money. While we sympathise with the position of shareholders, we must act in accordance with our legal obligations and in the interests of creditors as a whole. Unsecured creditors are not likely to be repaid in full, but we must aim to achieve the best possible outcome for them.