Sanjeev Gupta holds crisis talks with unions after Greensill collapse

Sanjeev Gupta says his steel empire continues to trade as normal despite it scrambling to refinance $US5bn.

Sanjeev Gupta says Greensill’s collapse has created a ‘challenging situation’. Picture: AAP

Sanjeev Gupta’s steel empire is holding crisis talks with unions on both sides of the globe, as the British businessman battles the fallout of the collapse of his major lender Greensill Capital, declaring it needs “careful management”

Executives across Mr Gupta’s GFG Alliance of companies are moving to assure unions and governments that business is continuing as normal despite Green-sill’s administrators chasing GFG for a $US5bn debt owed to the financier.

Mr Gupta held a crisis meeting with UK union officials overnight on Tuesday, and said Greensill’s collapse had created a “challenging situation”.

“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,” he said in a note to staff seen by The Australian.

GFG Alliance is seen as most vulnerable to Greensill’s collapse, given Greensill has financed GFG’s acquisition of a string of global assets, including the €740m ($1.14bn) acquisition of ArcelorMittal’s struggling European steel mills by Mr Gupta’s Liberty Delta in 2019.

Greensill administrator Grant Thornton is trying to recoup $US5bn ($6.5bn) GFG owes to the financier, while Mr Gupta is racing to secure refinancing so he can save about 7000 Australian jobs.

The Australian Workers’ Union held emergency talks with Mr Gupta’s local management as it seeks assurances over the future of industrial facilities over fears the implosion of Greensill could sink GFG Alliance.

“The AWU has been meeting with company management and other key stakeholders on a rolling basis,” AWU national secretary Dan Walton said.

“Given the complexity of the situation we anticipate this will continue for some time. Our overwhelming priority in these discussions is shoring up the long-term viability of our members’ jobs.”

Despite the situation remaining “fluid”, Mr Walton said he hoped the profitability of Mr Gupta’s Australian steel assets would allow it to survive Greensill’s collapse and avoid the same fate which beset Whyalla steelworks’ former owner Arrium.

Mr Gupta bought the Arrium business after it fell into administration in 2016 for about $700m.

“While the current situation regarding Greensill is obviously unsettling and fluid, we remain buoyed by the fundamental strength of the Australian steel business. Our members have worked extremely hard to get these steel operations humming and profitable and they don’t deserve to be swept up in all this,” Mr Walton said.

“Profitability is strong and global prospects are good, which is a very different situation to the Arrium crisis of 2016. We will continue to work closely with management and government to ensure the fundamentally strong Australian steelmaking businesses continue to thrive.”

Federal Small Business Ombudsman Kate Carnell told The Australian that some of GFG’s suppliers had received late payment for their invoices, fuelling concern about the group’s financial situation.

“You can imagine how concerned these businesses are and your heart has to go out to them because they’re worried that it’s all going to happen again,” she said.

“Some businesses who would have expected to be paid haven’t been. It’s too early to say if that’s systemic. But in the current environment, even if you’re paid a little bit late, you’re worried.

“You hope GFG can get new finance so that these businesses can continue.”

But Paramjit Kahlon, chief executive of Mr Gupta’s Liberty Steel, which operates the Whyalla steelworks, said the company was profitable and operating as normal. Mr Kahlon said that in the past week he had been in “frequent contact” with unions, suppliers and representatives from all tiers of government, saying the group was “making progress” in diversifying its funding.

“Our core businesses continue to benefit from strong market conditions generating robust sales and cash flows, and our operational efficiency program has improved profitability,” he said in a note to staff seen by The Australian. “In addition, we are making progress in our discussions with financial institutions that can help diversify our funding.

“We have reached the point where our integrated steelworks is again profitable. This is an incredible feat. And each and every member of our team deserves credit for this achievement. We have momentum, we have adopted a continuous improvement mindset, and we have a clearly defined plan for our transformation.”

Mr Kahlon also said speculation about the fallout of Greensill’s collapse was also “incredibly frustrating” for GFG workers.

“Since I wrote to you last Friday the media speculation about GFG’s relationship with Greensill has continued,” he told staff.

“I have no doubt that this must be incredibly frustrating for you and for the wider community in both Whyalla and Tahmoor.

“I know it can be difficult in times of speculation, but you have continued to deliver for our customers and support one another. For that, I am grateful.”