Sanjeev Gupta claims GFG Alliance is the largest creditor of the failed Whyalla steelworks and owed $500m

Creditors are meeting for the first time in Whyalla today, as Sanjeev Gupta claims his company GFG Alliance is the largest creditor of the failed steelworks.

Sanjeev Gupta claimed in a memo to staff last week, that his companies were the biggest creditor of the failed steelworks. Picture: Brendon Thorne/Bloomberg via Getty Images

Sanjeev Gupta says his company GFG Alliance is owed $500m and is the largest of creditors who will gather on Monday to hear the extent of the debt racked up by the ­failed Whyalla steelworks.

The claim comes as administrator KordaMentha, state government officials, including Premier Peter Malinauskas, and creditors owed well north of $600m hold the first creditors’ meeting of OneSteel Manufacturing in Whyalla.

At the afternoon meeting, it is expected that a ballpark figure for the total debt owed by OneSteel – a subsidiary of Gupta’s GFG Alliance – will be revealed, with publicly ­announced debts already pushing past $640m.

A state and federal government bailout package, which includes emergency payments for creditors, expressly rules out handing any money to entities related to Mr Gupta. Picture: Brett Hartwig

Some have speculated the total debt could reach $1bn.

It is unclear if Mr Gupta will attend Monday’s meeting. Mr Gupta claimed, in a memo to staff last week, that his companies were the biggest creditor of the failed steelworks. A state and federal government bailout package, which includes emergency payments for creditors, expressly rules out handing any money to entities related to Mr Gupta.

“This process will take time, involving complexities, but our focus must remain on supporting Whyalla while safeguarding our interests, particularly as we are the largest creditor with around $500m owed to the group, testament to the support we’ve provided Whyalla,” Mr Gupta said in a memo sent to GFG’s 6000 staff.

Mining services contractor NRW Holdings has also claimed a $113m debt, but says this is secured against the Whyalla port, which is still owned by Mr Gupta’s GFG.

Directors of companies connected to Mr Gupta have sought legal protections under safe-harbour laws.

Olvera Advisors principal Damien Hodgkinson, who specialises in helping companies dealing in crisis management and distressed investments, has been retained by entities related to Mr Gupta’s GFG Alliance and InfraBuild.

Safe-harbour protections typically involve drafting external consultants to help directors engineer a turnaround of the business without the risk they could be pursued for insolvent trading.

Directors of GFG Alliance itself, or related entities including InfraBuild, have sought the protections for their board, sources said. GFG and Mr Hodgkinson declined to comment.

First creditors’ meetings are usually a somewhat staid affair, with the main order of business to agree to keep the nominated administrator on in the role.

The last time the steelworks went into administration, when former owner Arrium failed in 2016, this did not happen, with the original administrator Grant Thornton turfed out in favour of the financiers’ pick in KordaMentha, who are now about to have their second tilt at selling the operations.

With the governments stumping up a maximum $384m to their preferred administrator – KordaMentha – to run the steelworks while in administration this time around, and with the South Australian government being the first-ranking creditor, a move to unseat KordaMentha seems unlikely.

Meanwhile, Minter Ellison partner Nick Anson, who specialises in restructuring, said the move by the State Government to tip the steelworks into administration appeared unprecedented, and presented a new strategy that would be closely monitored by both other governments and the investment community.

Mr Anson said sophisticated investors would now be aware that this strategy existed, which potentially had ­sovereign risk implications.

Originally published as Sanjeev Gupta claims GFG Alliance is the largest creditor of the failed Whyalla steelworks and owed $500m