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The British government is ready to step in and oversee an imminent insolvency of a crucial part of Sanjeev Gupta’s Liberty Steel business should it be necessary, London’s High Court has heard.
A group of Gupta’s creditors, led by his now defunct main lender Greensill Capital, pushed to place Speciality Steel UK (SSUK), which employs close to 1,500 people across five sites in the north of England, into compulsory liquidation at the court hearing on Wednesday.
The court also heard that the Official Receiver, a member of the Insolvency Service that oversees insolvencies on behalf of government, had filed a draft application to appoint a “special manager” if the business does go into liquidation.
However, the government is “not in negotiations” around “taking steps to own SSUK” or to otherwise provide “financial assistance” to the business, according to a letter sent by the Department for Business and Trade earlier this month, which was referred to during the hearing.
The Official Receiver can elect to appoint these third-party administrators, which operate independently from government, in the event of complex and large-scale insolvencies.
Gupta’s GFG Alliance, the conglomerate in which Liberty Steel sits, has been beset by legal claims and criminal probes since the 2021 collapse of Greensill. GFG denies any wrongdoing.
The fate of the Yorkshire-based steel business has been in limbo since an earlier attempt to restructure its debt in court fell apart in May amid opposition from creditors, several of which have separately filed winding-up petitions to close down the company.
The letter from the business department stated that “the Official Receiver is prepared, should SSUK enter into compulsory liquidation, to take control of SSUK’s affairs”.
The department added in the letter that in the event an Official Receiver was appointed, the government could “facilitate” a “sales process” for the group.
“[His Majesty’s Government] has been approached by independent third parties who have expressed an interest in returning some or all of the sites to steel making,” the letter said.
Gupta is opposed to the plans to wind up the business and is seeking more time to appoint his own administrators who could also oversee a sale of the business.
A barrister representing Greensill Capital said the plan under this scenario would be to sell the business to a special-purpose vehicle “connected to the current shareholder, Mr Gupta”, however.
Judge Sally Barber, noting that she had not seen the draft order from the Official Receiver and did not want to rule on a “blind basis”, adjourned the winding- up petition until “the first available date after today”. This means a further hearing could take place as soon as Thursday.
A Liberty Steel spokesperson said after Wednesday’s hearing: “We continue to believe our commercial solution backed by major private capital provides the best outcome for the business, its employees and all stakeholders concerned without cost to UK taxpayers or unnecessary uncertainty.”
The largest creditor pushing to wind up SSUK is Citigroup, which is acting in an administrative capacity overseeing bond-like investment products that Greensill Capital sold to other investors.
These investors, which include UBS, claim they are owed more than £233mn plus further interest and costs. The Swiss bank inherited the exposure when it took over failing local rival Credit Suisse, which had poured billions of dollars of its clients money into investments linked to Greensill.
SSUK’s barrister told the court that under Gupta’s proposal Liberty Capital UK, which was described as “another entity within the GFG Alliance”, would fund the steel business’s employee wages and “ongoing liabilities” until a pre-packaged insolvency is launched.
Gupta has lined up financing from BlackRock for this plan to retain control of the business, the Financial Times reported earlier this week. Greensill’s barrister noted that while Gupta had referred to a “term sheet” from “well-known” investors that included BlackRock, creditors had “not actually seen” a copy of the document.
The scale of SSUK’s overall debts are unclear as the company has not filed audited accounts for more than five years. Gupta is being criminally prosecuted in the UK for failing to file accounts for scores of his businesses, including SSUK. The metals magnate is defending himself against these charges.
