Thousands of jobs are at risk after troubled steel and mining group Arrium was placed in voluntary administration after failing to win the support of its lenders for a funding deal.
The debt laden company has appointed Grant Thornton as administrators, with executive control to be transferred immediately.
Arrium's lenders this week rejected a $US927 million ($A1.23 billion) lifeline from Blackstone fund GSO Capital Partners that would have involved lenders taking a severe haircut on their debts.
The company struggled to come up with alternative proposals acceptable to its lenders - who include Australia's four major banks, several global banks and US bond holders.
"It has become clear to the board that it has, unfortunately, been left with no option other than to place the relevant companies into voluntary administration, in order to protect the interests of stakeholders," Arrium said.
The company is weighed down by a $2.1 billion debt, while its flagship Whyalla steelworks and iron ore mining business in South Australia has been draining cash.
Grant Thornton has promised to maintain business as usual across the group's operations while it undertakes a comprehensive review of Arrium's steel and mining businesses.
"Our focus will be to stabilise current trading, maintain business as usual across the group's affected operations, and identify ways to restore the performance of key business units," Grant Thornton managing partner Paul Billingham said.
Arrium warned in February it could mothball its Whyalla steel plant and mining operations if it was not able to cut costs, and the move into administration increases the likelihood of a shutdown.
That could directly hit 1,100 jobs at Whyalla, and put at risk the company's nearly 6,000 employees elsewhere.
Its lenders could also consider reviving a sale process for Arrium's Moly-Cop business, the world's largest supplier of grinding media used in mining and construction, which has remained profitable, analysts said.
South Australian Treasurer Tom Koutsantonis said the state is working with the federal government to come up with a package that could ensure the South Australia steelworks continue to run.
The appointment of administrators makes Arrium the most significant casualty among Australia's mid-sized resources companies that used debt to expand iron ore production during boom years.
Slowing Chinese demand and a glut of supply from larger rivals like BHP Billiton and Rio Tinto has resulted in a collapse in iron ore and steel prices over the past two years.
"This company has had too much debt for a while, and the downturn in iron ore prices has exposed that. They paid too much for expanding their iron ore business, and its been unsustainable," Morningstar mining analyst Matthew Hodge said.
The administrators will hold their first meeting with creditors within eight days.