Sanjiv Gupta’s GFG Alliance says it is in advanced due diligence to choose a new financier for its steelworks in Whyalla, according to comments given to the Financial Times. An application to wind up the operation will have a first hearing in court later this week, Kallanish notes.
The Whyalla steelworks was bought by GFG alliance after previous owner Arrium went bankrupt in 2016. Surging steel prices however mean that the plant should now be profitable.
The site has nevertheless been caught up in the controversy over GFG’s financing. The company was encouraging suppliers to sign up to its financing scheme with Greensill Capital, whereby they could receive money early if they accepted a reduction in payment, which reports suggest was around 8%. Suppliers however had already begun to voice dissatisfaction over the extended payment terms that the plant was offering.
The collapse of Greensill has prompted Credit Suisse, which had funded Greensill, and Citibank which is acting on its behalf, to request that GFG’s operations in Australia are wound up and sold off to repay Greensill’s creditors. Now GFG is trying to secure financing to keep the business running to head off attempts at winding it up.
It remains uncertain what role the Australian government may play in the process. An AUD 50 million ($38m) credit facility for use in investing in upgrading equipment at the plant remains unused, but the government has stated that the funds cannot be used to settle debts. The steelworks is a key employer in the city of Whyalla.