GFG Alliance says it has working capital to run its Whyalla operations after refinancing Greensill debt

Whyalla steelworks owner GFG Alliance says it has refinanced debt owed by its Australian arm in full, bringing hope to the town.

GFG Alliance says it has refinanced its Australian debt to failed lender Greensill in full and has adequate working capital to continue to operate the Whyalla steelworks and Tahmoor coal mine.

The UK-based conglomerate headed by Sanjeev Gupta, which has been under pressure to refinance $US5bn ($6.5bn) in debt globally to the failed supply chain financing company Greensill, said a deal had been struck over the $430m owed by Liberty Primary Metals Australia.

The deal is not yet finalised however, with “customary conditions precedent and documentation’’ to be completed over the next four weeks.

It is understood that San Francisco-based alternative investment fund White Oak Global Advisors has struck the deal with GFG.

Greensill itself would not provide comment on the debt deal beyond a statement released on Wednesday afternoon.

Executive chairman of GFG Alliance Sanjeev Gupta.

“GFG Alliance is pleased to announce that LIBERTY Primary Metals Australia has agreed terms to refinance its Greensill exposure,’’ a spokesperson said in a statement.

“The new financing is sufficient to pay out its Greensill debt in full and to provide ongoing working capital for the LPMA group, which includes the integrated mining and primary steel business at Whyalla and its coking coal mine at Tahmoor.

“The offer is subject to customary conditions precedent and documentation, a process which has commenced and is expected to complete within four weeks.

“GFG Alliance is in continuous discussions with multiple financiers on a competitive basis for various parts of its business and is committed to securing sustainable funding solutions to replace funding provided by Greensill.’’

Liberty Steel director Ray Horsburgh said there had always been strong interest among lenders for a refinancing of the debt after the collapse of Greensill.

“Despite what people were saying, it was never in doubt. It just took time to sift through the process and the offers,” Mr Horsburgh said.

“The whole of the Gupta empire in Australia is in good hands.”

GFG is scheduled to front court on Thursday for a directions hearing for a winding up application brought against the company by Citibank, and it is understood that the debt deal does not derail this process.

However Thursday’s hearing is understood to be likely to be pushed back to early July for administrative reasons.

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

The NSW action cames five days after Credit Suisse sought a winding-up order of Mr Gupta’s $US6bn global metals business Liberty Commodities.

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

Mr Gupta sought to calm nerves at his Australian operations during this process, writing an open letter to the people of Whyalla last month.

In the letter, Mr Gupta said he remained committed to the Greensteel transformation project to transform Whyalla into the world-leading carbon-neutral steel producer.

“Whyalla has long played an important role in Australian manufacturing, providing high quality steel that has shaped much of the country’s infrastructure for many decades,” Mr Gupta says.

“I care deeply about continuing this legacy and building upon it to ensure a sustainable future for industry and society.

“ … Whyalla will always be a special place for me; I have said before it is my spiritual home. I’ve made many friends since I acquired the business (in 2017), both in the community and among our workforce.’’

Mr Gupta told News Corp Australia in December that the Whyalla steelworks, after years of underperformance, were due to return to profitability in 2021, and with commodities prices strong, the associated iron ore mines have been performing strongly.

SA Premier Steven Marshall said it was an important day for the Whyalla community.

“The workers of Whyalla deserve enormous credit for the recent, much improved performance of the Whyalla Steelworks, which has contributed to this refinancing

“Our Government remains a steadfast supporter of the people of Whyalla, the local Council and of course the steelworks and the Middleback Ranges mining operations.

“The South Australian and Federal governments have worked closely together to give potential financiers the confidence to back Whyalla.

“GFG Alliance Executive Chairman, Sanjeev Gupta, has often told me he regards Whyalla as his ‘spiritual home’ and I am sure his faith in the future of the city and the steelworks has driven his determination to seek this second refinancing of the operations.’’

SA’s Opposition Leader Peter Malinauskas said the development was “undoubtedly a really big relief” for the workers and for SA.

“I think every South Australian had their hearts in their mouth at the news that we might see yet another owner of the steelworks go into receivership and the fact that that has now been averted is a really good thing,” he said.

“We’ve got a situation in South Australia at the moment where we can’t afford to lose a single other company, let alone one of this size and significance to out state.”

Mr Malinauskas said it was important to remain “vigilant around the terms of this refinancing”.

“Because we want to make sure that this good news translates into long-term security for the people that work at the steelworks and those people that rely on this for our state’s economy,” he said.

GFG employs about 35,000 people globally and more than 2000 people in Australia.

The company bought the Whyalla assets, formerly owned by listed company Arrium, out of administration in 2017 and Mr Gupta soon set about announcing ambitious investment pans for the steel mill as well as sweeping renewable energy plans, most of which are yet to be realised.