Gupta steel firm pauses some UK production while debt deal sought

Liberty Steel, the UK’s third largest steel maker, will pause some production at its UK plants on Monday as workers prepare to be furloughed for as long as a month while the business tries to conserve cash.

About 180 workers at Liberty’s plant in Rotherham, South Yorkshire, were put on furlough on Friday evening under the government’s coronavirus support scheme. Some of the site’s 660 staff have been told they may not be able to return to work until 14 April as the company tries to reduce its cash outflows.

A spokesman for Liberty’s parent company, GFG Alliance, confirmed that some parts of the business would be “operating intermittently”. This can be achieved “without compromising the condition of the plant”, it said in a statement.

Sanjeev Gupta, Liberty’s owner, has told the heads of companies in his steel and industrial empire to keep cash in the business and “reduce their call on group resources”, as he tries to reach an agreement over debts owed to a collapsed lender.

Gupta’s GFG Alliance, which employs a global workforce of 35,000, was put under severe pressure this week after its key lender, Greensill Capital, collapsed into administration on Monday.

GFG is scrambling to find new lenders to prop up its businesses, which employ 5,000 people in the UK. Of these, 3,000 work at Liberty Steel, while GFG also runs Britain’s last aluminium smelter, in Scotland, as well as an energy supply business. The company has significant operations in Australia and across Europe.

Gupta said on Friday that he had received various offers to refinance, but that he needed time to reach a deal with Greensill’s adminstrators. Unions are hopeful that financing will be secured and believe the steel business can be profitable.

Gupta began to build up the business in the 1990s by acquiring otherwise unloved steel assets in the hope of creating an industrial powerhouse. Lawyers for Greensill this week told a London court that it had lent $5bn (£3.6bn) to GFG to help fund the businesses, according to the Financial Times.

In a letter sent on Friday to GFG’s senior leadership and seen by the Guardian, Gupta said GFG had had “constructive discussions” with Greensill’s administrators. He said GFG hoped for a “formal standstill agreement that would put on hold arrangements between the two parties and allow both sides more time to assess and negotiate next steps”.

This week, GFG hired investment bankers from PJT Partners, the restructuring advisers Alvarez & Marsal and the law firm Norton Rose Fulbright to help in negotiations with the administrators.

They are also advising on negotiations with an undisclosed number of potential lenders to inject more cash to the business. Gupta said he was “enthused by the amount of offers that we have received” but added that “given the scale of our operations this process will take some time to organise”.

Talks to secure longer-term financing could take several months to complete, said one source with knowledge of the situation. The timing of GFG’s cash needs have not been disclosed, and it is thought that detailed knowledge of the Greensill loans is limited to a tight-knit circle around Gupta.

Gupta told the heads of GFG’s businesses that they should “take prudent steps to manage their cash positions carefully and reduce their call on group resources”. His message also sought to portray the group as “performing well”, but with “specific businesses … affected by either Covid-19, structural changes in their markets, or pressures on cash related to a rapid ramp up in demand.”

The UK business secretary, Kwasi Kwarteng, has discussed the situation with executives at Liberty Steel, but the company is seeking private-sector funding.

Unions representing the steel workers want the government to give assurances that it will step in to save production if a funding deal falls through. France’s finance minister, Bruno Le Maire, said this week that his government would step in to protect jobs at GFG’s French sites.