Moly-Cop – the world’s largest supplier of grinding media used in mining and construction – will be acquired by US private equity firm American Industrial Partners for $US1.23 billion ($A1.64 billion).
"The sale is a great step forward for all creditors of Arrium. It is probably $300 million to $400 million more than what was offered last year," adminstrator Mark Korda of KordaMentha told reporters after a creditors meeting in Sydney.
Proceeds from the sale of the profitable division, which was not under administration, will be used to reduce Arrium's total debt of $2.8 billion.
The sale is likely to be finalised by January.
In a resolution passed at a creditors meeting in Sydney on Friday, Arrium's financers agreed to put the current administrators KordaMentha in charge of realising the remaining assets and distributing the proceeds.
KordaMentha said in a report last month that it was better to sell the individual businesses held by the South Australian group than to wind it up, as this would provide a better return to creditors.
And the administrator on Friday took the first step in realising value for creditors by signing an agreement to sell Moly-Cop - the company's only profit making division.
Arrium's other assets include the flagship Whyalla steelworks and port, an east coast steel business, and an iron ore mine in South Australia.
The administrators have currently received a handful of non-binding indicative proposals for the remaining business, Mr Korda said, but declined to indicate their identity or the likely size of the bids.
Recent media reports have named South Korean steel giant POSCO and UK steelmaker Liberty House as among the possible bidders.
"Arrium's steel business has 6000 employees and holds strong market share. It is a big company. So the bidder will have to be a substantial company," Mr Korda said.
Arrium, formerly known as OneSteel, was placed in voluntary administration in April after its lenders refused to take a severe haircut on the debt as part of a $A1.2 billion lifeline from a Blackstone fund.
The company, which formerly operated as BHP's long steel products division, was hit hard by a plunge in iron ore and steel prices over the past two years that left it struggling with a high debt load.
"Part of Arrium's demise was the high level of debt because of all the acquisitions it made. When the iron ore price fell to below $US40 a tonne, they made huge losses," Mr Korda said on Friday.
The administrators have found $300 million in savings across the company through reduced supply contracts and savings and have also sought funding from the state and federal governments.
The administrators expect to complete the sale process for the remaining businesses by end of January 2017.