Jobs in peril as Sanjeev Gupta in $6bn pit after Lex Greensill plunged into ­administration

Metals and mining magnate Sanjeev Gupta faces a desperate race to refinance and save 7000 Aus­tralian jobs.

Sanjeev Gupta is under mounting pressure to find a new lender for a towering debt pile. Picture: John Feder

Metals and mining magnate Sanjeev Gupta faces a desperate race to refinance $US5bn ($6.5bn) and save 7000 Aus­tralian jobs, including workers at Whyalla steelworks, after his main financier, headed by one-time Bundaberg billionaire Lex Greensill, plunged into ­administration.

The businessman is under mounting pressure to find a new lender for the towering debt pile owed to Greensill to keep his companies trading after he stopped payments to the fin­ancial high-flyer in recent days.

Behind the scenes, Mr Gupta’s GFG Alliance was seeking a temporary repayment standstill with Greensill aimed at preventing its debts being called in, a move that could trigger the collapse of his global empire.

Greensill formally appointed Grant Thornton as administrators to its Australian and UK arms over the past 24 hours, ­admitting the loss of insurance coverage — and the consequent decision by banking giant Credit Suisse to wind down $US10bn worth of funds associated with its financing activities — had placed it in “severe” financial distress.

Mr Greensill hosted a call with his global staff of more than 1000, at the end of which his message was clear. “Goodbye.”

Before the call, Greensill had filed for administration, stating it was in “severe financial distress” and unable to repay a $140m loan to Credit Suisse, following ­“defaults” from its key customer: Mr Gupta’s GFG Alliance.

The Australian Workers Union held emergency talks with GFG as fears grew among thousands of Australian workers that its Australian unit could face collapse just five years after Mr Gupta was hailed as a saviour for rescuing Whyalla from administration as part of a rapid-fire $15bn global acquisition spree.

Lex Greensill hosted a call with his global staff of more than 1000, at the end of which his message was clear. “Goodbye.” Picture: Annabel Moeller

IAG was dragged into the unfolding crisis, with the Australian insurer seeking to calm investors over its exposure to Greensill, saying it had no net insurance ­exposure to trade credit policies to the collapsed supply chain ­financier.

Its shares were heavily sold off in early trade as speculation mounted over its exposure to Greensill, with high-profile Sydney short-seller John Hempton on Monday warning it could run into the billions of dollars.

Mr Gupta, from his Dubai base, sought to calm concern over the future of his Australian empire, which comprises Whyalla employing 1500 workers, a NSW coalmine and its most profitable business, Infrabuild, which includes electric arc furnaces, steel distribution centres and metals recycling businesses.

“I want to update you following the news reports on the challenges being faced by one of our major lenders, Greensill,” Mr Gupta said in an internal email obtained by The Australian.

“There is no doubt this is a challenging situation which needs careful management, but I want to reassure you that our businesses remain in a strong position and are operating as normal. We have adequate funding for our current needs, and discussions with new lenders on supplying additional long-term funding are making good progress.”

Grant Thornton, the administrators of Greensill Capital in Australia, will convene the initial meeting of creditors within eight business days. However, it faces a tricky task to unpick the complex web of relationships between the two companies that grew dependent on each other, along with the maze of interconnected relationships within GFG itself, in its efforts to recover the $US5bn said to be owed by GFG.

It is believed about $650m of that total relates directly to Mr Gupta’s Australian operations.

The collapsed supply chain fin­ancier relied heavily on insurance as part of its business model, lending money to companies to pay their suppliers, with insurance in place to protect it against defaults.

Mr Greensill’s financial kingdom lies in tatters. The Queensland sugar cane and melon farmer — made a Commander of the British Empire for services to the economy in 2017 — has been holed up in his renovated vicarage in Britain’s Cheshire.

In January 2020, Mr Greensill was estimated to be worth more than $2bn. In December last year, he was clinging to plans of a Greensill float, telling The Australian an IPO “within the next two years is likely”. Now Grant Thornton has been charged with performing a corporate autopsy of Greensill, with hopes that part of the business can be salvaged.