British industrialist Sanjeev Gupta’s Liberty Group in major debt breakthrough

Whyalla steelworks owner Liberty Group, headed by British industrialist Sanjeev Gupta, has come to an agreement over billions of dollars worth of debt.

GFG Alliance executive chairman Sanjeev Gupta.

Sanjeev Gupta’s Liberty Steel Group looks set to restructure an estimated $US5bn in debt after striking an agreement with the main creditors of Greensill Capital, Greensill Bank and Credit Suisse Asset Management.

Liberty, which owns the Whyalla steelworks and is part of Mr Gupta’s GFG Alliance, said late Tuesday that it had signed a term sheet “subject to contract” to restructure the debt.

The company declined to release an exact debt figure on Tuesday however it has previously been reported that its debts ran to something in the order of $US5bn globally.

Liberty was plunged into chaos in March last year when Greensill, which operated a complex supply chain financing model, failed, with the collapse threatening to spill over into Liberty’s global network of steel, mining and industrial businesses, which employ tens of thousands of people.

Greensill was Liberty’s key financier, and its failure left the company with a cash flow and debt servicing crisis.

Liberty set up a Restructuring and Transformation Committee, tasked with sorting out the debt problem, which on Tuesday said it had made “a major step in the group’s refinancing’’.

“The agreement remains subject to documentation and the respective internal approvals,’’ Liberty said in a statement.

“All parties will now work to prepare and execute the agreement, providing Liberty with the platform to develop longer term sustainable financing.

“Under the agreement, the parties have adjourned the winding up petitions against Liberty entities.’’

Liberty Steel Group’s chief transformation officer Jeffrey Kabel said: “After several months of negotiations, we have now reached an agreement in principle that will provide recovery for the creditors and will significantly deleverage and de-risk Liberty.

“This is a major step forward in our restructuring and transformation and we will now work at pace with the creditors to prepare and execute the agreement.”

Repayment of the debt will occur through a combination of lump sum, scheduled and bullet repayments, Liberty said.

Mr Gupta, who bought the Whyalla steelworks out of administration in 2017 and has since returned the steelworks and associated iron ore mines to profitability, had to scramble to avoid a debt crunch when Greensill, headed by Queensland expat Lex Greensill, failed.

Credit Suisse went so far as to start insolvency proceedings against GFG Alliance in Australian courts earlier this year, however the Restructuring and Transformation Committee appears to have headed off that risk.

About $430m in debt is understood to have been associated with Liberty’s Australian assets, owned by Liberty Primary Metals Australia.

Mr Gupta initially had grandiose ambitions for particularly his South Australian operations, revealing a number of huge potential projects including building a new blast furnace and gigawatts in new renewable energy projects.

The company’s debt woes put paid to those ambitions, however Mr Gupta told News Corp Australia earlier this year that the steelworks had returned to profitability – a target which he did not believe possible when he first took it over- and that profits at the steel manufacturing business Infrabuild had doubled.

Speaking to News Corp Australia in April, Mr Gupta said the Greensill failure, compounded with issues caused by the pandemic, had been very difficult for the company and himself personally.

“The last two years have been unlike any other in my lifetime. They’ve certainly been very difficult years, a lot of hard work has gone into those situations.

“There’s always something good out of something bad and there is certainly good out of this.’’

Mr Gupta is now focussed on achieving his ambition to be able to produce carbon neutral “Greensteel’’ by 2030.

GFG is also keen to look at using hydrogen as a fuel source in its steelmaking processes.

Originally published as British industrialist Sanjeev Gupta’s Liberty Group in major debt breakthrough