Whyalla steel windfall eases debt burden for Sanjeev Gupta’s GFG Alliance

There is positive news for workers in Whyalla as Sanjeev Gupta’s GFG Alliance group agrees to a debt restructuring deal.

GFG Alliance founder Sanjeev Gupta has been delivered a financial lifeline by surging global steel prices. Picture: AFP

Sanjeev Gupta has used a profit windfall from his Whyalla steelworks to help repay creditors and restructure debt across his Australian business.

Surging global steel prices has delivered a financial lifeline for Mr Gupta’s debt-heavy global empire GFG Alliance, which had been pushed to the brink following the collapse of financier Greensill Capital earlier this year.

GFG said it had agreed to a debt restructuring covering its Australian business with Greensill’s key creditor Credit Suisse Asset Management.

The deal will “provide a stable financial platform” for the Australian business as well as securing a recovery plan for creditors.

At the same time, GFG will inject the equivalent of $93m into its UK steel business allowing the company to restart the core Rotherham electric arc furnace.

Figures released early Monday showed GFG’s Liberty Primary Metals Australia (LPMA) business, which in turn owns South Australia’s Whyalla steel mill and a coking coal mine at Tahmoor in NSW, delivered a “record-breaking performance”, including earnings for financial 2021 of $729m.

This was sharply up from the $106m a year earlier. Revenue jumped 15 per cent to $2.52bn.

“The forecast for LPMA remains strong due to its ongoing operational efficiency drive, continuous improvement initiatives and favourable market conditions, underpinned by strong investment in infrastructure,” GFG said in a statement.

“Continued strength in the steel and coking coal markets has helped to offset the recent correction in iron ore prices.”

The profit surge comes as pricing and margins on most steel products around the world have been at all-time highs on booming infrastructure spending – hot-rolled coil prices – a key benchmark for steel – have increased more than fourfold year on year.

GFG said the strength of the Australian business will enable it to make a “substantial upfront payment” to Greensill Bank and Credit Suisse.

Under the agreement, the balance of debt will be paid in instalments to Credit Suisse and Greensill Bank, through the amended maturity date of June 2023

Mr Gupta, the son of an Indian commodities trader, has used his Liberty House group for a rapid global expansion of steel production and renewable energy developments known as the GFG Alliance. However, questions over the funding models and transparency of his operations have been raised in the industry.

In a statement, Mr Gupta said GFG’s Australian integrated operations “are now profitable and performing the best they have for many years”.

“The deal we have agreed today provides a stable financial platform for our (Australian steel) business and secures a recovery plan for Credit Suisse Asset Management and Greensill Bank following the collapse of Greensill Capital.

“I’d like to thank all our stakeholders – government, union representatives, customers, suppliers and of course our employees and the local community – for the support they’ve shown GFG Alliance as we managed our way through the challenges created by the Greensill collapse”

Mr Gupta said he remains committed to Whyalla as well as longer term plans to shifting to hydrogen-fired “Greensteel” production at the plant.

The next stage in GFG’s global refinancing will be in Europe where a number of new lenders have expressing interest in refinancing the company’s steel assets, the steelmaker said.

Mr Gupta rescued the Whyalla steelworks from financial turmoil in 2017 and had trumpeted new plans including a $1bn conversion to green steel.

GFG employs 35,000 people across 30 countries.

Originally published as Whyalla steel windfall eases debt burden for Sanjeev Gupta’s GFG Alliance