Lenders come after Liberty Steel

Settlement of petitions against Liberty Steel’s specialty steel division could still go ahead.

The company, part of Sanjeev Gupta’s GFG Alliance, employs hundreds of people in South Yorkshire, including in Rotherham. GFG underwent a restructuring and transformation campaign following the collapse of its main lender, Greensill Capital.

HM Revenue & Customs (HMRC) issued a petition for the specialty steel company to be wound up, but after positive discussions the petitions were withdrawn.

However, a judge recently ruled that financial firms Citibank and Credit Suisse can proceed with their own liquidation petition, filed in court by those seeking to recover money owed to them. The courts do not see it as a debt recovery process, but rather that the company cannot pay its debts and must be liquidated so that the liquidation can be used to collect on the company’s assets.

The Government restricted legal claims and liquidation petitions to protect companies from foreclosure action by creditors due to debts related to the coronavirus (COVID-19). These restrictions have now ended.

The chief judge of the Briggs Insolvency and Companies Court ruled that, despite the impact of the Covid-19 pandemic, Liberty Steel’s financial difficulties followed the collapse of its main lender Greensill Capital, an invoice finance specialist that operated with less regulation than traditional banks and that went into administration.

Court documents show that the Rotherham-based specialty steel division, with expected turnover for the year to March 2021 of £267m, owed Citibank and Credit Suisse £46,860,465.59. Other parties to the alliance owed £19,913,081.97 and $131,615,184.95.

Commercial

Gupta argued that the pandemic has had a significant adverse financial effect on the companies, adding: “The coronavirus had an almost existential effect on GFG Alliance operations globally. There was not a single part of the many companies that was not affected. , although there were varying degrees of impact Overall, production was severely hampered and several plants had to close or production was substantially reduced.

“The damage appeared to be substantial and we had to take extraordinary measures to try to keep businesses running. This was made even more difficult by absenteeism due to employee illness, severely reduced production and the need to close operations. plants suddenly.

“Demand in many of our sectors almost evaporated over a significant period of time, which had a massive impact, and prices came under severe pressure. It was inevitable that some of our sectors would be hit hardest by the crisis. “The automotive, air travel industries almost completely ceased during the lockdown and the construction industry was severely affected. Each of these industries are significant consumers of steel.”

“If there hadn’t been a pandemic, I think the companies would have continued to operate successfully as they had before with funding from GCUK. [Greensill] (which would have continued in operation) or from alternative sources of financing”.

However, the judge found that “the statement is patently challenging, as the words ‘continued to operate successfully’ presuppose that the Companies had been operating successfully prior to coronavirus, but there is little evidence that this was the case, and no They led me to the evidence that supported the premise.”

The position of Gupta and his GFG Alliance was weakened by their “opaque structure” and “questionable corporate governance arrangements” described by a recent joint committee.

Accounts for the year ending March 2020 have not yet been released.

Justice Briggs said: “Mr Gupta has said that the reason for not producing more focused financial information is due to his view that it is “unlikely to materially assist the Court in determining the effect of the coronavirus on business.” that more detailed financial information is in draft form only or has been prepared for “internal management purposes only”.

“As far as the status of the financial information is concerned, even if it is a draft or was prepared for internal management purposes, I don’t see why that should prevent it from coming before the Court to support its assertions. It chose not to.” “. do it”.

The judge concluded that he was “satisfied that the reason invoked for liquidation would have arisen even if the coronavirus had not had an effect.”

Further court hearings on the liquidation proceedings are expected.

The search for refinancing continues and despite this and legal battles, GREENSTEEL’s operation in Rotherham is growing, driven by new investment and volume growth.

In October 2021, Liberty Steel restarted production at Aldwarke, following a £50 million injection of shareholder funds into the business. A restructuring of the special alloys business “to improve its productivity and competitiveness in advance of a possible sale or merger” further shifted the focus to Rotherham with an additional 161 jobs.

Rotherham MP Sarah Champion described the liquidation calls as “deeply worrying”. In a statement, she said: “I have written to the Secretary of State for Business to urge him not to allow this crucial strategic industry to be sacrificed as a result of problems in the wider group.

“I will do everything I can to defend our steel industry and the steel workers of Rotherham.”

Liberty Steel website

Images: Liberty Steel

Leave a Comment