Liberty Steel wins breathing space on refinancing debt

Sanjeev Gupta’s Liberty Steel has agreed a deal with its largest creditor that will provide much-needed breathing space as it seeks to refinance its debts.

The company, part of Gupta’s GFG Alliance group, said it had reached a standstill agreement with Germany’s Greensill Bank AG on debt facilities relating to its European steel operations.

The Bremen-based bank, now in administration, was a subsidiary of Greensill Capital. It held almost half of the $5bn of loans that Gupta’s group received from the Greensill group, which collapsed in March last year.

The deal is valid until the end of October and could be extended until the end of the year, according to a statement by Liberty Steel.

“Today’s standstill agreement with Greensill Bank demonstrates we are getting close to a consensual debt restructuring that is in the best interests of all our stakeholders,” Liberty Steel said.

The company, it added, was “working intensively” towards a settlement with its major creditors “in a timeframe which would obviate the need for a legal battle”. 

Greensill Bank’s administrator could not be reached for comment.

The bank was shut down by German financial watchdog BaFin in March 2021 after an audit discovered potential balance sheet manipulations. The regulator subsequently filed a criminal complaint against the bank’s management.

It said at the time that the bank was “unable to provide evidence of the existence of receivables in its balance sheet that it had purchased from the GFG Alliance Group”.

The bank helped to fund Gupta’s acquisition in 2019 of European steel plants from ArcelorMittal, whose prize assets comprised two steelworks in the Czech Republic and Romania.

The agreement comes just days after Gupta failed to have a legal attempt to wind up three of his UK steel businesses thrown out on the grounds that their problems were caused by the coronavirus pandemic.

Citibank, acting on behalf of creditors including Credit Suisse, had been seeking to shut down the businesses over unpaid debts. A High Court judge found that measures designed to protect companies forced into difficulty because of the coronavirus pandemic do not apply.

Gupta has been racing to secure fresh financing since the collapse of Greensill but has yet to secure a long-term alternative. The industrialist had relied on the group to help fund a global acquisition spree to build GFG Alliance which at its peak employed more than 35,000 people and boasted annual revenues of $20bn. 

Delivering his judgment last week, the judge said: “Taking off the ‘blinkers’ the court has the advantage of 20:20 vision and sees that the companies have been unable to attract alternative financing arrangements for the last 14 months. It is more likely than not that the reason for not securing alternative finance is a failure to produce financial information to a funder to support finance.”