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Gupta injects 50m into British steel plant after restructuring in Australia

 


Metals tycoon Sanjeev Gupta has agreed to a major financial restructuring of its Australian steel mill and will inject £50m into new funding for its UK plant, putting an end to months of uncertainty for thousands of workers.

The deal will provide much-needed breathing space for Gupta, who has been racing to find new financing for his global metals and energy empire, the GFG Alliance, since the bankruptcy of major lender Greensill Capital in March. Conversations with existing creditors, US debt investor White Oak Global Advisors, have stalled in recent months.

In particular, the commitment to cash infusion will be a welcome consolation for the 3,000 employees working at Gupta’s Liberty Steel plant in the UK. At two major plants in Rotherham and Stocksbridge, Yorkshire, plants have been nearly shut down in recent weeks due to extreme shortages of working capital and production. These funds will directly secure approximately 650 jobs in Rotherham.

Roy Rickhus, secretary general of the UK steel union community said the news is “a late but important step in the right direction and shows that the GFG can raise money for the UK”.

Under the terms of the debt restructuring that occurred over the weekend, GFG will prepay funds related to Australia’s steel mills and mines to existing creditors Credit Suisse Asset Management and Greensill Bank. The balance of the outstanding debt will be amortized over the next two years.

Jeffrey Stein, Liberty Steel’s chief restructuring officer, said Australia’s debt restructuring “provides clarity and stability to the business and ensures a clear recovery plan for creditors”.

This month Sanjeev Gupta celebrated his 50th birthday with a lavish party on the island of Mykonos. © Simon Dawson/Bloomberg

“We have agreed to a restructuring plan. . . Before we signed the contract, we made it clear that we needed cash and that the rest of the money would be accrued interest. He is doing his best to pay off a lot of money,” said one person briefed about the deal at Credit Suisse.

GFG has more than $5 billion in outstanding debt, mostly Greensill. The Metals group owes $1.3 billion to Credit Suisse alone, of which $350 million is related to Australian assets and the majority of $950 million is to business in the UK. GFG has agreed to repay about a third of its current $350 million, according to two people close to the talks.

The Australian restructuring will pave the way for GFG to inject £50m in cash to Liberty Steel UK, allowing production to resume in Rotherham, the company said. GFG still expects to find buyers for its Stocksbridge business, which produces parts for its aerospace customers, but said the cash input would allow it to run a “focused production campaign.”

Initial funds, which GFG describes as “shareholder funds”, are allocated to the business through a new independent entity, Liberty Capital.

Gupta, who celebrated her 50th birthday with a grand party on the Greek island of Mykonos earlier this month, said the financing “will give us time to prove that our operations can be run efficiently, allowing us to finalize a longer debt restructuring.”

Despite developments in Australia and the United Kingdom, Gupta faces numerous challenges to stabilize the group, particularly the investigation by the UK’s Serious Fraud Office.

In France, GFG is in a fierce battle with American investment group American Industrial Partners for control of Europe’s largest aluminum smelter, widely regarded as the crown jewel of its European business.

On Sunday, Stein promised further developments. “The next step in global refinancing will be Europe, where a significant number of new lenders have expressed interest in refinancing our steel assets,” he said.

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