Gupta’s warning to steel bosses

STEEL magnate Sanjeev Gupta has told his top Australian executives its main banker Greensill Capital will likely file for insolvency.

The embattled UK-based industrialist, owner of South Australia’s Whyalla steelworks, said he was preparing for the insolvency action to change the relationship between the high-flying duo.

Mr Gupta’s GFG Alliance is seeking to protect its position by making repayments on Greensill loans to an administrator rather than direct to its financier.

While Mr Gupta told senior management it was a routine safeguard for the business, given the swift unravelling of its main funding line, the move underscores an accelerating fallout between the two industry titans as they battle to keep their empires afloat.

GFG failed to make one payment to Greensill on Monday, according to a Financial Times report.

Sources close to Mr Gupta said that could reflect a move by GFG to withhold regular payments given increasing uncertainty over whether Greensill would trade its way through the current crisis.

London-based Greensill was founded a decade ago by Lex Greensill, 45, the son of a Bundaberg farmer who in recent years has found himself named among the billionaires on Australia’s rich lists. His company offers finance that allows businesses to extend the time they have to pay bills.

Greensill’s main insurer cut a $4.6bn policy this week as it grew uncomfortable over exposure, triggering Credit Suisse to suspend $US10bn ($12.95bn) of funds invested in loans arranged by the financier.

Lawyers for Mr Greensill this week pleaded in the NSW Supreme Court to force the extension of the insurance policies, the loss of which would trigger a chain of events that could lead to the insolvency of its clients, they argued.

“(This) would put at risk more than 50,000 jobs, including over 7000 in Australia,” they said.

Mr Gupta told executives on a Wednesday phone hookup that he was in talks with alternate banks amid mounting pressure to find a stopgap solution to refinance his large debt pile with Greensill.

Although he stressed a business-as-usual message for GFG in Australia, the nearterm challenges for Mr Gupta are mounting, given his risk profile has partly proved the undoing of Greensill itself.

Despite dire warnings of the loss of the insurance policies, on Wednesday Greensill Capital withdrew its legal bid to force an extension of the policies, raising questions about the group’s next move.