The Whyalla steelworks, a significant player in the Australian steel industry, has found itself in troubled waters once again, entering administration for the second time in less than ten years. KordaMentha, a renowned insolvency and restructuring firm, has been appointed as the administrator. The South Australian government placed the steelworks into administration after it began losing $1.5 million daily. Debts amounting to $1.3 billion and a meager $8 million left in the bank painted a grim picture of the company's financial health.
The steel plant was operating precariously, described as running "hand to mouth," with safety at the site becoming a matter of "luck." This precarious situation prompted the urgent intervention of administrators. KordaMentha’s appointment has highlighted the extent of the challenges facing Whyalla. Known for their expertise in restructuring, they have been widely regarded as the best choice for this role, having previously served as administrators in 2016. This familiarity with the business has allowed them to hit the ground running.
Financial Strain and Safety Concerns
Before administration, Whyalla's financial woes were exacerbated by mounting debts and daily losses. The plant's operational status was critically unsustainable, with only $8 million available in its accounts. Such financial constraints forced the steelworks to adopt a "hand to mouth" approach to its operations, where resources were stretched thin, raising significant concerns about safety and maintenance standards.
"Clearly very little maintenance has been done since we were last here." – Mr Hams
KordaMentha's task is challenging, but they are optimistic about stabilizing the situation with support from governmental stabilization packages.
"It's going to be challenging, but that said we're really blessed and very lucky and grateful to the state government and the federal government for putting the stabilisation package in place." – Mr Hams
The Role of Sanjeev Gupta's GFG Alliance
The Whyalla steelworks was owned by Sanjeev Gupta's GFG Alliance, a privately run family business not accountable to shareholders. This lack of public accountability has led to limited transparency regarding operations in Whyalla. The collapse has prompted investigations by both KordaMentha and the Australian Securities and Investments Commission (ASIC) into the company's operations and Gupta's role in the financial debacle.
"ASIC is aware of the concerns regarding the entity operating Whyalla steelworks and is actively monitoring the situation." – ASIC
KordaMentha's investigation will delve into whether any trading occurred while insolvent, which could have significant implications for the directors involved.
"If it was trading insolvent, that is a significant issue for the directors but that's an investigation we're duty bound to undertake and we will do that." – Mr Hams
Future Prospects and Potential Buyers
As administrators work towards stabilizing Whyalla steelworks, potential buyers have expressed interest. KordaMentha reports that both domestic and international players are considering investing in the steel plant. However, any new buyer will need to be an established entity capable of managing such a substantial investment.
"We know who's interested in this, there's domestic players, there's international players. This is a big piece of expenditure so it's not going to be a fly-by-night operator, it's going to be a really established steel maker." – Mr Hams
Despite challenges, there is cautious optimism about finding a suitable buyer, thanks to the stabilization package provided by government bodies.
"That is going to be a material advantage in finding a buyer." – Mr Hams
