More than 35,000 jobs, including thousands at steel mills in Britain and at Whyalla in South Australia, are at risk as GFG Group, the conglomerate controlled by British entrepreneur Sanjeev Gupta, races to refinance about $4bn owed to failed finance company Greensill.

Greensill’s UK operating companies collapsed on Tuesday and the Australian company that is the head of the group, Greensill Capital, followed suit on Wednesday morning, Australian time.

About 5,000 people work for GFG Group’s British Steel and about 1,000 are directly employed by the South Australian mill, but thousands more are dependent on it either as contractors or suppliers and it underpins the economy of the entire town of Whyalla.

GFG is currently in dispute with Greensill over the debt and sources with knowledge of the situation said the steel group’s efforts to disentangle itself from its financier were made more complicated because Greensill has made loans to multiple entities within GFG, secured against sales made within the group.

“We are currently in dispute with Greensill regarding the loan facility,” a GFG spokesman said. “In the circumstances we can make no further comment.”

A source with knowledge of GFG’s financial arrangements said that of the total of about $4bn owed to Greensill, “a very sizeable chunk” – some hundreds of millions of dollars – related to operations in Australia that include the Whyalla steel mill and steel distribution business Infrabuild.

Sources say that Infrabuild is very profitable but Whyalla, an ageing mill which Gupta has been trying to turn into a source of green steel, has only recently started turning a profit.

Over the past week GFG has been locked in meetings with the South Australian government, which has previously offered a $50m grant towards modernising the plant, and unions over the future of the mill.

Following the Greensill collapse, one of Greensill’s major backers, Credit Suisse, moved to protect its interests by appointing receivers from McGrathNicol to take control of its shares in the UK operation.

The shares were security for a US$140m loan Credit Suisse made to Greensill’s UK arm, Greensill Capital (UK).

Separately, the Swiss bank had already begun winding down US$10bn in funds invested in loans made by Greensill.

Greensill, led by the former Bundaberg sugar farmer Lex Greensill, had been trying to sell itself to private equity group Apollo Global Management, but action against the group by regulators in Europe and revelations in an Australian court that its insurance was under investigation have rapidly unravelled its complex structure over the past week.

Greensill offered supply chain financing, where it provided loans to big businesses so that they could pay their suppliers.

The former British prime minister David Cameron was an adviser to the company, as was the former Australian foreign minister Julie Bishop. She is reported to have recently cut ties with the company.

South Australia’s treasurer, Rob Lucas, said he was concerned about reports about Greensill and GFG in both the Australian and international press.

“Clearly Greensill has problems and no one’s denying there’s a close link between GFG and Greensill – it’s a question of whether they can refinance,” he said.

“We don’t want to overstate the issues, but there are clearly significant issues in play.”

He said the $50m had been offered by the previous government but was still available to GFG, as long as it was not used to refinance or pay down debt.

“We were interested in tangible infrastructure projects that would aid the transformation of the steel mill,” he said.

“It’s still on the table but given the media reports of the past fews days we’re going to monitor that carefully before making any payment across.”

Daniel Walton, the national secretary of the Australian Workers Union, which covers workers at the Whyalla mill, said the situation was complex and he expected talks between the union, GFG management and other stakeholders, including governments, “to continue for some time”.

He said that based on experience when the mill’s previous owner, Arrium, collapsed in 2016, the multiplier effect of losing jobs at the mill would be “massive”.

“Last time when it went into administration, house prices plummeted and essentially people couldn’t afford to leave,” he said.

“People were conservative in their spending – you look at the effect on local businesses, hospitality.”

“Our members have worked extremely hard to get these steel operations humming and profitable and they don’t deserve to be swept up in all this,” he said.

“Profitability is strong and global prospects are good, which is a very different situation to the Arrium crisis of 2016.”

As shockwaves from Greensill’s collapse spread, insurer IAG’s share price tumbled 5.6% on Tuesday morning, forcing the company to deny it was on the hook for $4.6bn in insurance for Greensill bonds written by a former subsidiary, The Bond & Credit Co (BCC).

IAG, which last week defeated legal efforts by Greensill to force it to extend the insurance, said it had “no net insurance exposure to trade credit policies including those sold through BCC to Greensill entities”.

Last week, the NSW supreme court heard that BCC was investigating $10bn in insurance written by a single BCC employee between June 2019 and July last year. BCC claimed the employee acted beyond his authority and that supporting documents were missing from insurance contracts, court documents show.

None of the contracts under investigation related to GFG, which is widely reported to be Greensill’s biggest client.

Chris Laverty, Trevor O’Sullivan and Will Stagg of Grant Thornton UK were appointed administrators of Greensill Capital (UK) by order of the UK courts on Monday.

In Australia, the directors of Greensill Capital, which includes Lex Greensill, appointed Matt Byrnes, Phil Campbell-Wilson and Michael McCann from Grant Thornton’s Australian operation as administrators on Tuesday.

“We are working closely with the UK administrators in relation to next steps in the administration process,” Byrnes said in a statement.

“We are not able to comment on any individual customer’s position at this stage. GCUK, as the provider of finance for the Greensill group via its supply-chain finance working capital products, is insolvent and is now in administration. The UK administrators will write to creditors with an update shortly.”