SA government ‘cautiously optimistic’ for Whyalla but quiet on plans if GFG Alliance refinancing efforts fail
The South Australian government is staying quiet on its plans for the Whyalla steelworks should Sanjeev Gupta’s GFG Alliance prove unable to find alternative financing ahead of its 6 May deadline.
Since his sprawling metals empire was caught up in the collapse of Greensill Capital, the British billionaire has been at pains to project confidence about the state of his Australian businesses.
The company operates the Whyalla steelworks in South Australia and a coking coal mine in Tahmoor, New South Wales.
Events seemed to enter a new phase over the weekend as three French car parts factories belonging to Alvance Aluminium announced they were seeking bankruptcy protections.
Appearing at a press conference alongside the prime minister Scott Morrison over the weekend, the South Australian premier, Steven Marshall, said he was “cautiously optimistic” about the fate of Whyalla steelworks.
“Obviously the GFG business is very important to us here in South Australia, but more importantly it’s a critical capability that we need continuing here in Australia for our nation. Steel manufacturing is absolutely crucial to our ambitions as a nation,” Marshall said.
“I am feeling cautiously optimistic for the moment because I think the fundamentals for the Whyalla business are right.”
“We hope we’ll be able to hear some good news ahead of the 6 May deadline when the NSW supreme court will be hearing the application for administration.” “I’m quietly confident, when I spoke to Sanjeev Gupta, he was increasingly confident he’ll be able to get that credit arrangement in place.”
The challenge facing Gupta is vast. His company is seeking to replace $6bn in financing across its operations spread across four continents. South Australia represents a fraction of this sum.
Marshall did not say what plans are being made in the event the company proves unable to secure finance by the time a winding-up application is heard in the NSW supreme court but he did not close the door on a bail-out application.
Under the previous Labor government, $50m in state government support was made available to GFG in order to expand the Whyalla steelworks.
The current Liberal government has kept up the commitment but has ruled out allowing the money to be used by the company to pay down debt commitments.
A spokesperson for GFG Alliance said the company has had “multiple
offers” of finance and that a deal will be done “within weeks”.
“GFG’s Australian operations continue to perform strongly in the current steel and iron ore market conditions,” they said.
“Our mining and primary steel business has received multiple offers of finance from large investment funds and is in advanced due diligence. The terms sheets as currently proposed would provide enough cash to repay the existing facilities.
“GFG Alliance expects the confirmatory due diligence to be complete within weeks before a final offer is accepted.”
Gupta’s businesses were caught up in the collapse of Greensill Capital owing to a series of complicated financial arrangements that have left it at the mercy of creditors such as investment bank Credit Suisse.
The complexity of these arrangements has proven problematic in recent weeks as the administrator Grant Thornton has recommended the winding up of Greensill Capital’s Australian arm which owes $4.9bn.
The company was used as an operational shell with all loans written in the UK, where a separate winding up application has snared Gupta’s business empire.
A Grant Thornton report did however reveal that Sanjeev Gupta was a shareholder in the failed company until 2016.