Sanjeev Gupta has been thrown a potential lifeline for his British steelworks after agreeing terms on a £200m loan from White Oak, a US-based private finance group.
The metals tycoon, whose GFG Alliance has been scrambling to find alternative finance after the collapse of its main lender Greensill Capital in March, still needs to secure approval from Credit Suisse for the transaction, which is also still subject to due diligence.
The Swiss bank has a claim on GFG’s Liberty Steel UK through financing originally provided by Greensill that was repackaged into its funds, according to two people familiar with the situation.
GFG, White Oak and Credit Suisse declined to comment. The BBC first reported the news.
The £200m loan would provide an injection of much-needed working capital into Gupta’s speciality steel plants in Yorkshire and allow them to return to full production.
Operations at the two main Yorkshire sites at Rotherham and Stocksbridge were already hit by the Covid-induced downturn in the aerospace and automotive sectors whose companies are customers of its speciality steel. But the situation became more acute with the demise of Greensill, which had lent as much as $5bn to GFG by the time it fell into insolvency.
The UK government in March rejected a plea by Gupta for more than £170m in emergency funding while the group restructured its debt, citing concerns that the money might not stay in the UK. Ministers, however, have signalled they would be prepared to step in as a last resort to keep the plants open. Liberty Steel is the UK’s third-largest producer, employing about 3,000 people across the country, including 1,600 in Yorkshire.
White Oak, which is based in California, has also stepped in to refinance Gupta’s Australian steel assets and associated mines, although that deal is also subject to final agreement. The company had previously provided a A$200m (US$155m) facility to Liberty’s Australia businesses, at a double-digit annual interest rate. It was also among lenders to British Steel before the company was bought by a Chinese group.
Separately, Gupta faces a lawsuit from Tata Steel over missing payments in relation to the purchase of the Yorkshire plants from Britain’s largest steel producer four years ago. Tata is suing three of Gupta’s companies — Liberty Speciality Steels, Liberty House Group and Speciality Steel UK — over the partial payment of the £12.5m due as part of the purchase.
Email excerpts in Tata’s filings to London’s High Court show how Gupta’s companies first cited the coronavirus pandemic, then Greensill’s implosion, as reasons for its difficulties.