Banks at risk of bad-debt blowout as Aussie steelmaker collapses

Sydney

COMMONWEALTH Bank of Australia and its competitors are staring at a potential blowout in bad-debt expenses as they try to claw back a combined A$1 billion (S$1 billion) of loans to steel and iron ore supplier Arrium Ltd, underscoring the looming threat to lenders from the commodities bust.

The banks may recoup less than 50 cents on the dollar they lent to the Sydney-based company, which handed control to an administrator on Thursday after lenders rejected its US$927 million recapitalisation plan with Blackstone Group LP's GSO Capital Partners.