Arrium Limited's balance sheet is seeing a lot of red – and so are the iron ore and steel group's slighted lenders. The banks were not consulted at all before Arrium's deal with US vulture fund GSO, which includes a massive haircut on the existing $2 billion debt, was announced to the market. Such is the fury of the 16 creditors that Street Talk understands some banks are willing to pursue the directors for breach of duties, and even go after their personal assets, if Arrium draws on the $US140 million "stand-by" facility stumped up by GSO. The facility, intended to provide "additional liquidity if required while the recapitalisation plan is progressed", could be the immediate lifeline Arrium can't use. As if the board of directors weren't already between a rock and a hard place. The messy litigation around the collapse of Alan Bond's Bell Group is a key precedent that should be compulsory reading at Arrium. The Bell liquidators commenced proceedings against the directors and banks claiming that a refinancing deal was a breach of duties because the directors knew that subsidiary companies were insolvent and that the refinancing favoured the banks over other creditors. Arrium has agreed to a deal requiring its existing lenders to accept 50¢ in the dollar, which some argue could be interpreted as an admission it is insolvent. In another case, ASIC went after Water Wheel directors Bernard Plymin, John Elliott and William Harrison for incurring further debts after the companies became insolvent. This is another precedent that could give Arrium pause before drawing on the $US140 million facility. Despite the banks' collective fury, the lenders were content to follow Lazard banker Lachlan Edwards' advice to appoint McGrathNicol executive chairman Peter Anderson as investigating accountant, revealed by Street Talk on Wednesday. Lazard and UBS are advising Arrium. Read more: http://www.afr.com/street-talk/arrium-banks-have-company-directors-in-their-sights-20160224-gn224y#ixzz45gxfaxDh