Liberty Steel Raised Cash through Circular Selling – Sunday Mail
Sunday Mail reported that Mr Sanjeev Gupta is facing fresh questions over his Liberty Steel empire raised cash from Greensill Capital by selling steel that it then planned to buy back itself. According to documents seen by the Sunday Times, Liberty Steel Newport in south Wales used a circular trading scheme where it sold steel to a company with close links to Mr Gupta, which another firm linked to the tycoon was then to buy back. The documents show that Liberty Steel Newport sold GBP 2.5 million of coils and tubes to VS International, a metals trading business with links to GFG. Liberty was then able to raise cash from Greensill, which provided finance against the invoice from VSI. Greensill normally lent Liberty 80% of an invoice’s value, according to the report, suggesting it handed around GBP 2 million to Liberty. VSI would then sell the steel to Gupta’s CS Management Services, which in turn would sell it back to Liberty Steel Newport. The same steel would then be sold for a second time to a third party, with Greensill again providing finance against the invoice.
Sunday Mail report said “The circular deals allowed Liberty to raise millions of pounds in cash from Greensill from a single shipment of steel. It is not clear whether the steel was even physically delivered to VSI. It is also not clear whether the transactions met the terms of Liberty are financing deal with Greensill.”
In a statement GFG said “We refute any suggestion of wrongdoing. We abided by all the normal rules that apply to inventory-based financing and in full knowledge of all parties involved. While GFG companies have done business with people known to the founder, the company has long-term customer relationships with major infrastructure, industrial, aerospace and automotive customers, as you would expect from one of the world’s largest steel producers and the operator of Europe’s largest aluminium smelter.