Whyalla jitters amid GFG fraud probe

South Australia has vowed to respond quickly if needed as talks between Whyalla owner GFG Alliance and its proposed refinancer blow out amid a fraud investigation.

Head of GFG Alliance Sanjeev Gupta. Picture: AFP

South Australia’s government has vowed to “respond quickly” if needed as talks between Whyalla owner GFG Alliance and its proposed refinancer blow out amid a fraud investigation into the steelmaker’s parent company.

Sanjeev Gupta’s GFG Alliance is still in discussions with US-based lender White Oak over the refinancing of the Whyalla steelworks and a Tahmoor coal mine, even as the UK’s Serious Fraud Office probes the steel magnate’s empire.

The federal and South Australian governments, meanwhile, are watching closely how the talks between the two parties play out, with both emphasising the importance of Whyalla without giving away any details of contingency plans should the refinancing deal fall apart.

“GFG continues to tell us that they are confident and White Oak confirmed that they are at least one party engaged in refinance,” South Australian Treasurer Rob Lucas told The Australian on Sunday.

“So we’re not heading down the path of hypotheticals at this stage. We’ve got a task force and the federal government’s got its own task force, so they’re monitoring the situation for both governments. And we’ll respond quickly if we have to,” he said, without providing further details of what a government response might look like.

The federal government said its focus was on the affected workers and the broader community.

“The government continues to closely monitor developments in relation to GFG Alliance’s Australian operations,” a spokesman for the Minister for Industry, Science and Technology, Christian Porter, said.

“The Morrison government knows how important it is for Australia to have the sovereign capability to make steel,” he added.

After claiming over the weekend that it would walk away from a hefty rescue deal for Mr Gupta’s businesses — including a $430m package for Australian assets and £200m ($363m) for the UK Liberty Steel, announced just a week ago — Californian company White Oak Global Advisors later said it would continue its efforts to refinance Liberty Primary Metals of Australia’s debt, subject to financial due diligence and acceptable governance.

“Our consideration continues to be providing capital to good companies in critical industries while preserving jobs,” a White Oak spokesman said.

It came hours after the Serious Fraud Office announced a probe into the steel tycoon’s business arrangements, including GFG’s $US5bn ($6.4bn) financing by Greensill Capital, owned by the failed Bundaberg financier Lex Greensill.

The SFO said it had a live investigation looking at “suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business of companies within the Gupta Family Group Alliance (GFG), including its financing arrangements with Greensill Capital UK Ltd’’.

After news of the probe broke, White Oak said that it was unable to continue its arrangement with GFG Alliance.

“As with any regulated financial institution, we are not in a position to continue discussions with any company that is under investigation by the Serious Fraud Office for money laundering,” White Oak said.

Hours later it clarified its position, saying it would continue with the due diligence of the Australian operations.

GFG confirmed to The Australian on Sunday that the refinance deal was ongoing.

“GFG Alliance continues to work with White Oak towards refinancing Liberty Primary Metals Australia,” a GFG spokesman said.

While there is some hope of the refinancing going ahead, if it is not secured Mr Gupta will be left scrambling for half a billion in cashflow to keep the businesses going, raising fears for thousands of jobs in the South Australian steel plant and NSW coal mine.

AWU National Secretary Daniel Walton said the uncertainty of the situation was stressful for the union’s members and their communities.

“Our understanding is the deals concerning the Whyalla steelworks and Tahmoor coal operations are continuing to move forward, which comes as little surprise because the fundamentals of these operations are strong,” he said.

“The simple fact is Australia needs these operations to continue because they are critical to our sovereign capability.”

Meanwhile, an ASIC spokesman declined to comment on whether the corporate regulator was mounting an investigation into the embattled company following the news of the British probe.

It is believed the investigation has been going for several months and includes looking at Greensill’s debt packaging of future invoicing of Gupta’s companies in a practice known as “prospective receivables’’. Investigators are looking into companies that were invoiced but deny doing business with companies associated with Gupta or Greensill.

David Cameron, the ex-British prime minister who was on the Greensill payroll and was accused of “stalking’’ ministers to lobby for Greensill to access coronavirus funding, told a Treasury committee on Thursday that reports that some GFG invoices appeared fraudulent were “clearly very disturbing if true”. He rejected accusations that the Greensill business was “a giant fraud’’ and a Ponzi scheme.

“Just because the business goes into administration, it doesn’t mean that everything about it was wrong. It doesn’t mean the whole thing was some giant fraud,’’ Mr Cameron said.

A GFG spokesman insisted that GFG Alliance continued to serve its customers around the world and was making progress in refinancing its operations. However, it is unclear how Mr Gupta will be able to raise fresh funds given the fraud investigation.

Earlier this week the UK Financial Conduct Authority announced it was investigating Greensill Capital and its packaging of loans, sold to investors through Credit Suisse.