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Deal set to save Whyalla steelworks

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The embattled Whyalla steelworks appears to have been saved, with Sanjeev Gupta’s GFG Alliance announcing a refinancing deal just hours before a court bid to wind up its operations is set to begin.

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In a statement sent just before 3pm, GFG said its subsidiary LIBERTY Primary Metals Australia had agreed terms to refinance its exposure to Greensill Capital, which collapsed in March.

“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 statement from a GFG Alliance spokesperson said.

GFG faces its first hearing in the NSW Supreme Court tomorrow to defend an application by Citibank to wind up its Australian operations including the Whyalla Steelworks and a coking coal mine in New South Wales.

Citibank is acting on behalf of Credit Suisse, which is looking to recover billions of supply-chain finance funds globally after Greensill was placed into administration in March.

It is not known at this stage if tomorrow’s directions hearing will go ahead.

The Whyalla steelworks is the town’s biggest employer with around 1200 workers and a further 600 work in the associated Middleback Ranges mines nearby.

The Australian Financial Review reported the refinancing offer is understood to have been struck with San Francisco-based White Oak Global Advisors and is worth $430 million.

The GFG Alliance spokesperson said the offer was 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,” the spokesperson said in the statement.

Citibank is yet to respond to the GFG announcement.

But the South Australian Government has welcomed the news.

Premier Steven Marshall said the future of the steelworks had been “a huge concern for Whyalla and cabinet”.

“We are now just hugely relieved – this is a massively important business for our state,” he said.

“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.

“We know that the demand for steel is very strong at the moment, we know it is a profitable operation and we also know that we need to keep sovereign capability in steel manufacturing here in Australia so this is a real win for the people of Whyalla and the people of this state.”

Giles MP Eddie Hughes, whose electorate covers Whyalla, said the announcement was a step in the right direction given the uncertainty that existed in the community in recent weeks.

“We still have to focus on the future and we still have to see some of the detail around the financing but his is clearly good news for the community of Whyalla,” the Labor MP said.

Buoyed by booming steel prices, GFG has said its Australian operations are profitable and has insisted for several weeks that it was closing in on a refinancing deal.

A GFG Alliance spokesperson said in a statement to InDaily yesterday that no final orders would be made at the May 6 directions hearing “so the completion of the refinancing process and directions hearing date do not have a direct bearing on each other”.

“As stated previously, we will defend our position in court if required to do so.”

Ahead of the GFG refinancing announcement, UniSA expert Dr Will Mackay said the court process was likely be drawn out over “months to years” and had a number of possible outcomes if refinancing could not be achieved.

He said the refinancing of loans by GFG would likely bring an end to the NSW court proceedings.

“However, there may be covenant breaches that, if unresolved, could trigger other filings against GFG by creditors,” Mackay said.

The state and federal governments have been in talks about a possible bailout to keep the steelworks afloat should it be placed into liquidation.

A $50 million funding state government support package announced by the former Labor government is still on the table but Treasurer Rob Lucas says the money is only to be used for “tangible infrastructure” in Whyalla and not to keep the business afloat.

Citibank is also acting for Credit Suisse in court action against GFG in London in a bid to repay funds lost by Credit Suisse investors.

The British Government last month ruled out a $300 million rescue package for Gupta’s UK operations citing GFG’s “opaque” financial systems.

UK-based Sanjeev Gupta was hailed a saviour of the Whyalla business and town after former steelworks owner Arrium went into administration and he took it over in 2017, vowing to improve and expand the operation.

GFG had planned a $1 billion upgrade at Whyalla but that was delayed by up to seven years last year as the global alliance flagged huge cuts amid sluggish steel sales amid the coronavirus pandemic.

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