Sanjeev Gupta’s OneSteel hit with wind-up applications, government finance talks have started
As worried Whyalla workers wait to hear their fate, Premier Steven Marshall has been in talks with the Prime Minister about finance to keep the steelworks afloat.
SA Business
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Government finance to keep the Whyalla steelworks afloat should owner Sanjeev Gupta’s firm be wound up has been discussed by Premier Steven Marshall and Prime Minister Scott Morrison.
The contingency plan to provide government bridging finance has been canvassed between the pair since early last month, when problems emerged with corporate funding of Mr Gupta’s GFG Alliance.
The steelworks’ ongoing operation was backed by Australia’s big four banks in 2016, when former operator Arrium went into voluntary administration.
Mr Gupta is scrambling to refinance his teetering global empire and more than 1800 South Australian jobs hang in the balance as creditors seek to seize control of GFG.
It is understood the contingency plan discussed by the Premier and Prime Minister would be activated in the event of GFG being unable to continue to fund the newly profitable Whyalla operation.
“We know that Whyalla has done an extraordinary job in terms of turning itself around,” Mr Marshall told The Advertiser.
“The people there need to be congratulated for their hard work.”.
Citibank, acting on behalf of Credit Suisse, has filed a winding-up in insolvency application for OneSteel Manufacturing and Tahmoor Coal.
Mr Gupta’s GFG Alliance has vowed to fight the move, lodged in the NSW Supreme Court on Wednesday.
It could trigger the appointment of liquidators to the Whyalla steelworks and associated mines, which together employ more than 1800 South Australians, and to the Tahmoor colliery in NSW.
Outside the Whyalla steelworks this morning, staff showed mixed feelings about the news that creditors seek to seize control of Sanjeev Gupta’s Whyalla steel operations.
Welding co-ordinator Tom Mitchell, who has been working directly or indirectly for the steelworks since 1978, said he was still confident about the future.
“The place was starting to move again,” he said. “(But) the world is going through something different with the COVID virus and everything has been affected.
“We’ll have some discussions at work today and see what happens.”
Technician Perry Eden, a contractor, said news about the winding-up application was “very worrying”.
“I just want the whole Gupta experience to be successful,” he said.
“I think we all really want him to succeed, otherwise Whyalla will be in a bad place.
“The COVID thing has put everything back. We’re hoping that it will now get on the right track.”
Storeman Brian Murphy has worked in the Whyalla steel industry since he was 16.
“I’m now in my 40s.”
“We believe in him (Mr Gupta) so let’s hope he can do what he says.”
LOCAL BUSINESSES REACT
Whyalla is again at the mercy of big business.
But the Upper Spencer Gulf City’s streets paint a picture of a town divided over how serious GFG Alliance’s financial woes are in determining its future.
Snap Fitness 24-7 Whyalla was a hive of activity on Wednesday morning, and manager Joanne Marshall said it was business as usual.
As a local councillor, she said uncertainty was no stranger to the town and this was “just another blip on the journey”.
“I think people are pretty resilient and are hopeful that we’ll find a way through this,” Cr Marshall said.
“You’ve got to take some confidence from GFG saying that the steelworks and mines are doing well at the moment and it’s a profitable business.
“If COVID has taught us anything it’s that if you don’t have a manufacturing base, particularly in steel, it really affects the sovereignty of your country.”
Heidi’s cafe owner Heidi MacDonald opened her venue just eight weeks ago, and said customers were noticeably low in the morning following the news, with several listening intently to broadcasts on their phones.
She said if the steelworks collapsed, it would affect hundreds of local families, who must now all be kept firmly in the loop about the company’s future.
Whyalla needed to diversify its economy, Mrs MacDonald said, so it was less reliant on the major employer.
She said that could be achieved through further expansions of its growing tourism industry, or decentralisation of government services now based in Adelaide.
“We’ve got all this land around us. We’ve got access to the north and the west - we’re in a very good location,” she said. “It’s a good opportunity to look at what else we can do.”
Maaric Industrial Dry Cleaners owner Chrys Press said up until about a week ago, the steelworks accounted for about 25 per cent of his business.
He has stopped providing services to the company amid concerns about its financial position and unsuccessful attempts to increase his prices and reduce account payment periods, which he said would help minimise the risk to his business.
When Arrium went into administration, his business lost more than $100,000.
“I can’t afford to get hit again, that’s for sure. It’s taken us all this time to get back on our feet since the last time,” he said.
City Plaza Espresso Cafe owner Liz Attard said her community was used to the cyclical turns of its economy, such as “the GFC, GFG and (former Whyalla Steelworks owner) Arrium”.
“The steelworks are in a better shape now than when it went into administration and if push came to shove it’s a little bit better than it was four years ago,” she said.
COMMUNITY LEADERS URGE CALM
Federal MP for Grey Rowan Ramsey said Industry, Science and Technology Minister Christian Porter would closely monitor the legal proceedings initiated in the NSW Federal Court yesterday by Citibank, acting on behalf of Credit Suisse.
“We are watching it very closely and are trying to seek clarification on Citibank’s claim on behalf of Credit Suisse,” said Mr Ramsay.
He warned a calm and steady approach was needed and that the steelworks was in a much better position than in the past.
“It’s way too early to panic,” he said. “We’ve been through tough times before – so let’s see what happens before we start jumping at shadows.”
Whyalla Mayor Clare McLaughlin urged the community to remain positive as the process played out, and not to jump to conclusions.
“We’ve been reassured by GFG Alliance that they will vigorously defend any legal proceedings; that they continue to have sufficient funds for their current operations – which are performing very strongly – and that they are progressing well in securing alternative funding,” Ms McLaughlin said.
“Council was recently briefed by GFG on their local operations, and it was extremely encouraging to hear about their profitability; the record rates of production; strong demand for their product; as well as the positive attitude of their employees despite recent external speculation.
“This is all very positive news that should give the community confidence in GFG’s future in Whyalla.”
Treasurer Rob Lucas added that the move was not entirely unexpected and “just an application in the NSW Supreme Court”, the full extent of which would not be known until the May hearing.
“So, from the government’s viewpoint, we are saying at this stage people shouldn’t jump to any alarmist conclusions.
“There are ongoing discussions. We had another discussion between State Government officers and Federal Government officers (Tuesday) at lunchtime.”
Mr Lucas said that was a scheduled meeting “and at this stage we don’t have any further details other than this application has been made”.
“We hasten to say we don’t want people to jump to alarmist conclusions at this stage because clearly there are significant numbers of workers and their families and others – and we don’t want them to be unnecessarily alarmed,” Mr Lucas said.
GFG VOW TO FIGHT MOVE IN COURT
A spokesman for GFG said the company would fight the moves by Credit Suisse in the courts.
“Any proceedings instituted by Credit Suisse will be vigorously defended,” he said. “We do not propose to comment on legal proceedings further.
“The Australian businesses are performing well and generating positive cash flow, supported by the operational improvements we’ve made and strong steel and iron ore markets.”
The decision comes after parallel action by Citibank in the UK courts, and amid attempts by Mr Gupta to secure about $500m in new funding for his Whyalla steelworks to plug the funding gap left by the collapse of Greensill Capital.
The wind up application includes consent from McGrathNicol for it to act as liquidator over two companies.
McGrathNicol partner Keith Crawford said the insolvency firm would seek to keep the business running if it was appointed as liquidator, saying the liquidators would “work constructively” with stakeholders, including employees, customers, suppliers, creditors and government, as it reviewed the future of the business.
The court action comes as Mr Gupta struggles to contain the fallout of the collapse of his key financier, Greensill Capital, which dived into administration last month.
Despite racing to refinance about $US5bn ($6.56bn) owed to Greensill, Mr Gupta has remained defiant, saying the debt isn’t due for another three years and none of his steel plants would close under his watch. The NSW Supreme Court action comes five days after Credit Suisse sought a winding-up order of his $US6bn metals business, Liberty Commodities.
SANJEEV: WHYALLA’S SAVIOUR?
Mr Gupta acquired Whyalla steelworks and other assets from Arrium in 2017 after it fell into administration.
He was hailed a saviour of the town. At his “Big Reveal” in December 2018, plans were unveiled to pump $600m into upgrading the steelworks, bolstering its capacity and securing 2500 jobs, while feasibility studies for a massive new steelworks producing up to 10 million tonnes per annum were worked through.
Plans to build a 280MW solar farm had already been announced, along with possible hydropower ambitions.
A collapse now would be devastating for the region.
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