Sanjeev Gupta’s OneSteel, Tahmoor Coal hit with winding up application

Sanjeev Gupta’s Australian steelmaking arm says it’s received ‘multiple offers of finance’ as it fights moves to put its Whyalla steelworks into liquidation.

Sanjeev Gupta. Picture: Brendon Thorne/Bloomberg

More than 2000 Australian jobs hang in the balance as Sanjeev Gupta’s creditors seek to seize control of his local steel operations, with Sanjeev Gupta’s GFG Alliance vowing to fight the move to appoint liquidators to key parts of his Liberty Primary Steel group.

Citibank, acting on behalf of Credit Suisse, filed a winding up in insolvency application for OneSteel Manufacturing and Tahmoor Coal on Tuesday in the NSW Supreme Court.

If successful, the move 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.

However Mr Gupta’s troubled Australian steelmaking arm said on Wednesday it has received “multiple offers of finance” from investment funds, as it fights off liquidation moves.

In a statement, a spokesman GFG Alliance said the company was considering term sheets from “large investment funds” that would be more than enough to repay creditors.

“GFG Alliance’s Australian Mining and Primary Steel (MPS) business, which includes Onesteel Manufacturing Pty Ltd and Tahmoor Coal Pty Ltd confirms it has received multiple offers of finance from large investment funds and is in advanced due diligence,” he said.

“The term sheets as currently proposed would provide enough cash to repay the creditors of MPS. GFG Alliance expects the confirmatory due diligence to be complete within weeks before a final offer is accepted.”

The move by Citibank comes after parallel action 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 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.

The Swiss bank has applied to a London insolvency court for administrators to file the order regarding Liberty Commodities, with the action bought by Citibank as a trustee.

Credit Suisse had $10bn of funds invested in loans arranged by Greensill which included debts packaged up by businesses run by Mr Gupta.

Liberty Commodities, established by Mr Gupta in 1992, trades raw materials while also structuring finance, logistics and risk management solutions.

At the same time, Mr Gupta’s is negotiating directly with Greensill’s administrator Grant Thornton in an attempt to strike a standstill on a $US5bn debt owed to the financier’s UK arm, offering protection from creditors as he races to find alternate financing.

Mr Gupta, whose empire employs 35,000 worldwide, said playing hardball on calling in loans will help no one, and it made no sense to close his plants, many of which he bought on the brink of collapse or from administration.

He said he had committed debt financing facilities with Greensill for another three years, so “according to us, these debts are not due”.

“It makes no sense for them or any of their creditors to destroy jobs but more importantly to destroy value because that is the value that will give them their recovery,” Mr Gupta told the BBC last week.

“So I am really confident that we will find short-term solutions through our own effort and long-term solutions through refinancing.

“None of my steel plants under my watch will be shut down.”

He doubled down on those comments, telling The Australian on Good Friday that he was marshalling his lawyers.

“We have our legal defences ready,” Mr Gupta said.

“There is a barrage of lawyers who are readying up all their guns to fight this off.

“What they are doing is not logical and the arguments were made to them very robustly that they are damaging their own stakeholders, their own recovery prospects.

“We are seeing a lot of interest in refinancing, so there is no reason why we can’t come through with an arrangement with them which would be good for them.”

Mr Gupta acquired Whyalla steelworks and other assets from Arrium in 2017 after it fell into administration. The following year, he bought Glencore’s Tahmoor coking coal mine.

Financial records filed with the Australian Securities and Investments Commission in 2020 show his Liberty Primary Metals group — including OneSteel Manufacturing, Arrium Mining Services, Whyalla Ports, Tahmoor Coal and Liberty Primary Metals — had drawn down $429.7m in a receivables purchase agreement through Greensill Capital.

According to separate financial records filed by Liberty Primary Metals Australia in November 2020, the group booked a $124.6m loss in the 2019 to 2020 financial year.

More recently GFG has said the recovery in steel markets has put its steel operations back in the black and running at close to full capacity.

The matter is due to be heard in the NSW Supreme Court on May 6, and a spokesman for GFG said the company would fight the move in the courts.

“GFG Alliance’s Australian Mining and Primary Steel (MPS) business, which includes OneSteel Manufacturing Pty Ltd and Tahmoor Coal Pty Ltd, does not conduct any financing with Credit Suisse and has not sold receivables to Credit Suisse,” he said.

“Any proceedings instituted by Credit Suisse will be vigorously defended. We do not propose to comment on legal proceedings further.

“GFG Alliance is in constructive discussions with Grant Thornton, Greensill’s administrators, and other stakeholders to negotiate a consensual and amicable solution on the way forward, which is in the best interests of all stakeholders. MPS is well advanced in preparations to refinance its Greensill facilities in the very near term.

“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.”

South Australian treasurer Rob Lucas warned against jumping to any “alarmist conclusions” on the back of the application to appoint liquidators.

“From our viewpoint, it’s part of the legal manoeuvring that we’ve seen going on in financial circles and legal circles for a number of weeks and months now,” he said.

“This is, at this stage, just an application in the NSW Supreme Court. It won’t be heard until May and it may or may not be agreed by the Supreme Court there. So, we would put this in the context of the ongoing legal and financial discussions that have been going on about the interactions between Greensill, other potential creditors and GFG and this is another development in relation to that.”

Mr Lucas said the state government would take Mr Gupta “at his word” that he would be able to refinance his debts and keep Whyalla operating under GFG’s control.

“At this stage we don’t have any further details other than this application has been made. And 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,” he said.

“GFG have continued to assure the market and the government, that they are confident they are going to be able to manage a refinancing of the relationship they’ve got with Greensill. We can only take them at their word at this particular stage and we’ll have to wait and see the results of their attempted renegotiation of finance and then whether or not this application is agreed to or not in May.”

Additional reporting: Jared Lynch