The downside of the deal is that existing shareholders, who had put up A$754 million in the company’s last capital raising in 2014, will be wiped out by the issue of fresh equity.
Australia’s big four banks will also need to agree to a haircut on about $2 billion in debt exposure to Arrium.
GSO is the credit and alternative investment arm of global investment giant Blackstone, and is worth $79 billion. Its funding will be used to retire Arrium’s existing debt and fund a restructuring of the steel and iron ore businesses.
This deal comes as a relief for the company’s management, which failed to get a good offer for its mining consumables business, despite it being the sole cash-generating unit in the group. It was also considering shutting down a major blast furnace which would have cost about 1500 jobs in South Australia.
Arrium’s stock, down 90 per cent in the past year, surged 47 per cent on Monday. The slump in the global steel and iron ore market, hit by chronic oversupply, made led to several major steel producers becoming unprofitable and struggling to keep the factories running.