Citibank filed for “winding up in insolvency” in the NSW Supreme Court on Tuesday against two businesses owned by Sanjeev Gupta’s GFG Alliance.
The two companies are OneSteel Manufacturing (trading as Liberty Primary Steel and the owner of the Whyalla steelworks) and Tahmoor Coal, which supplies coking coal to both the Whyalla steelworks and Bluescope’s Port Kembla mill.
If successful, The Australian Financial Review reports, the Whyalla steelworks could be sold off or be forced to seek a government bailout.
Citi is acting on behalf of Credit Suisse, which was a key backer of collapsed supply chain finance company Greensill Capital. Greensill is under administration by Grant Thornton.
GFG Alliance acquired the Whyalla steel mill from Arrium (which folded in 2016) in 2017 and Tahmoor from Glencore in 2018. The Whyalla plant employs over 1,200 people.
GFG is currently trying to refinance $6 billion of funding previously sourced from Greensill.
A directions hearing for the two GFG businesses is set for May 6. Credit Suisse has to prove the two businesses are insolvent.
GFG released a statement to the ABC saying it would vigorously defend against any proceedings instituted by Suisse, and was in “constructive discussions” with Greensill’s administrators.
“GFG Alliance’s Australian Mining and Primary Steel (MPS) business, which includes OneSteel Manufacturing Pty Ltd and Tahmoor Coal Pty Ltd, does not conduct any financing with Credit Suisse and has not sold receivables to Credit Suisse,” a spokesperson told the ABC.
“The Australian businesses are performing well and generating positive cash flow, supported by the operational improvements we’ve made and strong steel and iron ore markets.”