Morrison government confirms it is working on a back-up plan to keep Sanjeev Gupta’s Whyalla steelworks afloat.
Morrison government confirms it is working on a back-up plan to keep Sanjeev Gupta’s Whyalla steelworks afloat.

Canberra mulls Whyalla plan if Sanjeev Gupta falls

The Morrison government has confirmed it is working on a back-up plan to keep Sanjeev Gupta's Whyalla steelworks afloat, after a move by creditors to seize control of his local industrial operations.

A South Australian government contingency plan to provide bridging ­finance has been canvassed with Scott Morrison since early last month after the collapse of its main lender, Greensill Capital.

Minister for Finance Simon Birmingham said it was closely following the unfolding situation after a court action to wind up OneSteel Manufacturing, owner of Whyalla, and the Tahmoor coal mine had put 2000 jobs on the line.

"Governments are monitoring this situation very closely and indeed doing the type of contingency thinking and planning that would be prudent in these sorts of circumstances," Mr Birmingham told ABC Radio.

"Governments do need to be mindful of the experiences we've seen before when Whyalla has moved into administration, where we did have to provide some financing options for the steelworks that enabled it to continue working during that period of administration."

South Australian Premier Steven Marshall said the government was prepared to step in depending on the results of a promised refinancing by Mr Gupta and looming court action from investors owed money.

Still, Mr Birmingham said it was a complicated process.

Sanjeev Gupta. Picture: Tait Schmaal
Sanjeev Gupta. Picture: Tait Schmaal

 

"The way the legal obligations work on administrators is such that they have to be very cautious about what extra debts they accrue whilst they're in the process of paying out the existing liabilities and trying to find new owners."

"And so that is something that government has looked at in the past and that working closely with Steven Marshall and the state government, our government continues just to make sure we are looking at those examples from the past and being mindful of how we could respond if we need to, depending upon how these legal matters and financing matters proceed."

Mr Gupta's GFG said on Wednesday it was considering term sheets from "large investment funds" that would be more than enough to repay creditors.

The court wind-up hearing is set for May 6 and follows parallel action in the UK courts amid attempts by Mr Gupta to secure about $500m in new funding for his Whyalla steelworks to plug the funding gap left by the demise of Greensill Capital.

A lengthy legal dispute could ensue although Mr Birmingham still hopes Whyalla owners GFG Alliance can pull off a refinancing.

"There would be potentially quite some legal process based on what Mr Gupta and GFG Group have indicated before there could be a legal determination to put them into administration. And through all of that time, as I said before, we need to be ever mindful that GFG keeps indicating publicly that they are talking to alternative financiers."

"Hopefully GFG can and based on their public statements, we should have some degree of confidence that they will navigate this situation themselves without the period of administration and uncertainty."

The Morrison government also reiterated it was against a carve-up of Mr Gupta's Australian industrial empire.

"In terms of the GFG Group, they do have a number of vertically integrated assets or in sort of layman's terms, very highly connected businesses of different steel operations. And I don't believe it would be in the interests of Whyalla, Australia or the nation overall to see those different assets broken up and sold separately as a whole they provide for a more profitable business," Mr Birmingham said.

"And that is certainly an important consideration for us. But at present, there's no application before government to see some parts of the business sold off and others go in a different direction."

Fears are growing over the future of thousands of Australian workers just five years after Mr Gupta was hailed as a saviour for rescuing Whyalla from administration as part of a rapid-fire $15bn global acquisition spree.

Greens senator Sarah Hanson-Young called for the government to consider taking an equity stake in Whyalla to ensure its survival.

 

"Whyalla has already made it through the toughest of times and should be a beacon of hope for renewable energy, not facing collapse again.

The Morrison Govt should take an equity stake in steelworks to prevent its collapse and protect 1200 jobs," Ms Hanson-Young said on Twitter.

Originally published as Canberra mulls Whyalla plan if Gupta falls


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