UKGovernment Rejects GBP 170 Million Rescue Loan for Liberty Steel
According to reports in BBC over the weekend, British Government has rejected GFG Alliance’s request for GBP 170 million to cover its need for cash
According to reports in BBC over the weekend, British Government has rejected GFG Alliance’s request for GBP 170 million to cover its need for cash to run its operations. plea for a GBP 170 million rescue loan. As per media reports, the government refused the loan because ministers had concerns over the opaque corporate structure used by GFG, as well as whether UK taxpayer money would end up funding operations in other countries. Any assistance is more likely to come following an administration process, to support UK jobs as opposed to the corporate entity that owns it.
Mr Sanjeev Gupta had requested a GBP 170 million government bailout to save his conglomerate GFG Alliance, owner of Britain’s third biggest steel group Liberty Steel, from collapse. Mr Gupta had sent a letter to Department of Business to request the cash to support day to day operating expenses and absorb recent losses. Mr Gupta wrote “The collapse of Greensill has put financial pressure on the GFG Alliance and our British steel operations. We are still refining the details with my management team and our external advisors, but preliminary indications are that the steel manufacturing and processing operations would need in the range of USD 170 million to fund working capital and some additional capital to fund operating losses in the short term, which we are in the process of finalising. The support could be structured in a way that works to ensure value for money and appropriate protections for the taxpayer."
The Mail separately reported that the British Government is thrashing out emergency plans in case the situation rapidly worsens. It is thought the preferred route would be to wait for Liberty Steel to enter compulsory liquidation, at which point the Government would step in and keep the company running until a new buyer could be found. This would be similar to the rescue of British Steel which collapsed in May 2019.
The Guardian revealed on Friday that Greensill has been under investigation at the British Business Bank for months over the loans it extended to GFG Alliance through government backed Covid schemes. A source confirmed the BBB’s investigation began in the autumn, shortly after it had approved Greensill as an accredited lender able to hand out emergency Covid loans to struggling firms in June. The revelation suggests officials were raising red flags internally about Greensill’s lending practices months before its financial troubles started making national headlines in early March.
GFG Alliance has operations in 30 countries and employs about 35,000 staff. GFG Alliance employs about 5,000 people in the UK and was one of bankrupt Greensill’s largest borrowers, owing the firm an estimated GBP 3.6 billon. The firm has been struggling in the face of the pandemic, with cash flow problems compounded by the collapse of its main financier Greensill Capital, which fell into administration earlier this month. Liberty was forced to pause production at some of its UK plants earlier this month to conserve money. GFG is understood to have hired Alvarez & Marsal and PJT Partners to advise on efforts to identify new sources of funding.
According to Liberty Steel website, LIBERTY Steel UK is the third largest steel manufacturer in the country, with a footprint that covers ten sites across England, Scotland and Wales. It employs nearly 3,000 people and has an annual steel rolling capacity exceeding three million tonnes.
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