Sanjeev Gupta’s GFG Alliance is working on plans to raise new loans against parts of the group outside the UK, and on generating cash through accelerated sale of goods, as the metals mogul battles to save his empire.
The group is taking these steps to consolidate its finances as it continues to seek long-term alternative financing after the collapse of its main lender. Greensill Capital filed for insolvency earlier this month, forcing GFG, which has a turnover of $ 20 billion and employs 35,000 people on four continents, to scramble to secure funding.
British government rejected a direct way from Gupta Friday for more than £ 170million to help with working capital, as well as additional funds to cover short-term operating losses from the group’s UK operations during its debt restructuring. The proposal suggested the creation of an investment vehicle to provide financial returns over a period of time. Concerns are growing over the fate of Liberty Steel, the alliance’s steel business and the third largest British producer. GFG employs around 5,000 people in Great Britain, of which around 3,000 work in the steel industry.
Ministers, however, said they were worried about the opaque structure of the GFG and feared any document would end up leaving the UK. “Our priority is sites and jobs in the UK, not this company,” said a government official.
GFG has stepped up its “self-help” measures to avoid financial collapse, according to people familiar with the situation. These include selling scrap metal inventory and accelerating the sale of finished goods to help increase working capital. The company is also in talks to raise funds against those assets outside of Britain who have no debt to them. The money collected could then be transferred to UK operations, one person said. GFG’s most valuable asset is believed to be InfraBuild, its Australian company.
Another option being considered is to raise funds against certain operations of the group in the United Kingdom. One sticking point, however, is seen as obtaining permission from Greensill, which holds security over some of GFG’s assets. To complicate matters, Greensill’s directors are still attempting to establish the identities of all investors in the finance company and their position in the finance chain.
GFG said Greensill’s struggles had “created a difficult situation,” but stressed the group had “adequate funding” to meet current needs. It said it was taking specific steps in its specialty steels business in the UK to “stabilize business and improve cash flow”.
A government spokesperson said it was closely monitoring developments around Liberty Steel and continued to work closely with the company, the wider UK steel industry and the unions. The Financial Times reported last week that ministers drafted emergency plans take over management of GFG’s UK operations in the event of a collapse. The Treasury backed British Steel similarly in 2019 before it was finally sold to a Chinese steel group.
Members of the Business Select Committee (BEIS) are drawing up plans for an investigation into Gupta’s steel business in the UK, including its links to Greensill Capital, its relations with politicians and its support for the government.
However, Conservative MPs have reportedly vetoed any attempt by the committee to force David Cameron – who pressured Chancellor Rishi Sunak on behalf of Greensill – to break his silence. The Beis committee is expected to announce its investigation within fifteen days.
The FT recently revealed that when Cameron was Prime Minister he gave Greensill, an ally of former Cabinet Secretary Jeremy Heywood, an office in the Cabinet Office and a role of adviser “representative of the Crown”.
Meanwhile, the Sunday Times reported that Cameron signed a loan program in 2012 for NHS-linked pharmacies, even though an official report rejected Greensill’s proposals – and the Australian financier used his position to pressure 11 departments for private work .