Promising deal for Tata plant folds
Liquidating Tata Steel KZN struggles to sell plant with SA steel market in crisis.
THE spark of hope for Tata Steel KZN (TSKZN) employees to keep their jobs despite the liquidation of Tata’s Richards Bay ferrochrome plant, has fizzled out.
Company management on Thursday confirmed that a purchase deal with a prospective buyer had failed, largely as a result of the South African steel industry under stress.
‘Matuson & Associates’ Leslie Matuson, appointed as the company’s business rescue agent, has been actively evaluating all the possible options, including the sale of the company,’ said TSKZN Managing Director Ashwani Kumar Lal.
‘Tata Steel has been in active discussions with prospective buyers, including one of the largest ferrochrome players in South Africa.
‘However, a deal could not be finalised primarily due to failure of the prospective buyers’ inability to offer a credible business plan, again a reflection of the weak global economic situation, difficulties faced by ferrochrome producers in South Africa and partly also due to a legal position adopted by them which were not in the best interests of the creditors of the company.’
Deep in debt
According to Lal, Tata Steel will pay off about R480-million outstanding dues to secured lenders before covering liquidation costs, employees and other creditors.
But it is only a piece of the hefty debt pie.
‘Salaries for the entire month of September are being paid in full and consequently the cumulative support by Tata Steel stands at R1.8-billion, which remain outstanding,’ said Lal.
Tata Steel Limited holds a 90% equity stake in TSKZN and the balance is held by Tata Africa Holdings.
The business has deteriorated in recent years from being uncompetitive to completely unsustainable, primarily owing to an increase in power tariffs which comprised the bulk of operating costs.
‘When the plant was temporarily shut down in June for the winter, TSKZN’s board evaluated the business and concluded that owing to the global oversupply situation, the expected annual increase in power tariffs and the depressed product price scenario, placing TSKZN under Business Rescue was the best course of action in the interest of all stakeholders,’ Lal said.
