Sanjeev Gupta agrees new funding for Australian assets

Metals tycoon Sanjeev Gupta has agreed terms to refinance his Australian steel plant and associated mines on the eve of a court case to wind up the group’s operations in the country.

Gupta has been racing to find new funding for his global metals and energy empire, GFG Alliance, since its main lender, Greensill Capital, collapsed into administration in March.

GFG said on Wednesday that the new financing agreement, which still needs to be signed, would be “sufficient to pay out its Greensill debt in full” and to provide “ongoing working capital” for its Liberty Primary Metals Australia entity that owns Whyalla’s steelworks and a coking coal mine at Tahmoor.

California-based private finance firm White Oak Global Advisors has provided the financing, according to two people familiar with the matter. The group has previously provided a A$200m (US$155m) facility to Liberty’s Australia businesses, at a double-digit annual interest rate.

White Oak and GFG declined to comment.

The original Greensill financing for the assets was A$430m. The fresh funding, with the addition of working capital, is believed to be worth a similar amount, according to a person familiar with the matter.

The agreement to refinance the Australian steelworks and mining operations comes on the eve of a court action seeking the wind-up of the business, which is the main employer in the South Australian steel city of Whyalla.

Credit Suisse is seeking the wind-up of the Whyalla steelworks to recoup losses on invoices, which Greensill packaged into bonds purchased by the Swiss bank. A directions hearing on the case is scheduled for Thursday at the New South Wales Supreme Court.

Over the past decade, Gupta relied heavily on Greensill to finance a global buying spree of unwanted metals operations that saw him dubbed the “saviour of steel”. At the time of Greensill’s administration in March, lawyers for the firm said it had about $5bn of exposure to Gupta-related companies.

Gupta’s announcement that GFG had secured financing for the steelworks was greeted with guarded optimism in Whyalla, where residents are fearful the unravelling of his global steel empire could lead to hundreds of job losses.

Steven Marshall, the premier of South Australia, said a refinancing was the outcome that everyone in the state was hoping for and that he looked forward to the continuing transformation of the steelworks promised by GFG.

“Sanjeev Gupta has often told me he regards Whyalla as his ‘spiritual home’ and I am sure his faith in the future of the city and the steelworks has driven his determination to seek this second refinancing of the operations,” he said.

Gupta bought the steelworks out of administration in 2016 for about A$700m and promised to invest billions of dollars to upgrade the ageing infrastructure, develop a solar farm and lay the foundations to quadruple the population of Whyalla to about 80,000 people.

Days before Greensill imploded in March, GFG announced that the steelworks and mining operations were profitable and generating positive cash flows due to “operational improvements” and strong steel and iron ore markets”.

The business lost A$183m in 2019 and A$378m in 2018, according to documents filed with Australian regulators.