The metals tycoon Sanjeev Gupta is this weekend plotting a controversial deal to salvage his remaining UK steel operations and avert their collapse into compulsory liquidation – a move that would put close to 1,500 jobs at risk.
Sky News has learnt that Mr Gupta is in talks about a so-called connected pre-pack administration of Liberty Steel’s Speciality Steel UK (SSUK) arm, which would involve the assets being sold – potentially to parties linked to him – after shedding hundreds of millions of pounds of tax and other liabilities to creditors.
Begbies Traynor, the accountancy firm, is understood to be working on efforts to progress the pre-pack deal.
This weekend, Whitehall sources said that government officials had stepped up planning for the collapse of SSUK if an already-deferred winding-up petition scheduled to be heard next Wednesday is approved.
If that were to happen, SSUK would be likely to enter compulsory liquidation within days, with a special manager appointed by the Official Receiver to run the operations.
Mr Gupta’s UK business operates steel plants at Sheffield and Rotherham in South Yorkshire, with a combined workforce of more than 1,400 people.
SSUK is Britain’s third-largest steel producer.
Government will not offer bailout to UK’s largest bioethanol plant
Weekend Money: The ‘stealth shoppers’ keeping pricey secrets from their partners – and what it says about their relationships
Trump’s son-in-law Kushner takes stake in UK lender OakNorth
Sources close to Mr Gupta could yet secure a further adjournment of the winding-up petition to buy him additional breathing space from creditors.
In May, a hearing was adjourned after lawyers acting for SSUK said talks had been taking place with “a third-party purchaser”.
Their identity has not been publicly disclosed, and it has been unclear in recent weeks if any such discussions were continuing.
A connected pre-pack risks stiff opposition from Liberty Steel’s creditors, which include HM Revenue and Customs.
UBS, the investment bank which rescued Credit Suisse, a major backer of the collapsed finance firm Greensill Capital – which itself had a multibillion dollar exposure to Liberty Steel’s parent, GFG Alliance – is also a creditor of the company.
Grant Thornton, the accountancy firm handling Greensill’s administration, is also watching the legal proceedings with interest.
The Serious Fraud Office launched a probe into GFG – which stands for Gupta Family Group – in 2022.
On Saturday, a Liberty Steel spokesperson said: “Discussions are ongoing to finalise options for SSUK.
“We remain committed to identifying a solution that preserves electric arc furnace steelmaking in the UK-a critical national capability supporting strategic supply chains.
“We continue to work towards an outcome that best serves the interests of creditors, employees, and the broader community.”
Last month, The Guardian reported that Jonathan Reynolds, the business secretary, was monitoring events at Liberty Steel’s SSUK arm, and had not ruled out stepping in to provide support to the company.
Such a move is still thought to be an option, although it is not said to be imminent.
The Department for Business and Trade has been contacted for comment.
It has previously said: “We continue to closely monitor developments around Liberty Steel, including any public hearings, which are a matter for the company.
“It is for Liberty to manage commercial decisions on the future of its companies, and we hope it succeeds with its plans to continue on a sustainable basis.”
Read more:
Lola’s Cupcakes bakes £30m takeover by Finsbury Food
Trump’s son-in-law Kushner takes stake in UK lender OakNorth
Wednesday’s winding-up petition was filed by Harsco Metals Group, a supplier of materials and labour to SSUK, and is said to be supported by other trade creditors.
Mr Reynolds has already orchestrated the rescue of British Steel, the Scunthorpe-based steelmaker, after failing to reach a government aid deal with Jingye Group, the company’s Chinese owner.
Jingye had been preparing to permanently close Scunthorpe’s remaining blast furnaces, prompting Mr Reynolds to step in and seize control of the company in April.
The government has yet to make a decision to formally nationalise British Steel, although that is anticipated in the autumn.
Tata Steel, the owner of Britain’s biggest steelworks at Port Talbot, has agreed a £500m government grant to build an electric arc furnace capable of manufacturing greener steel.
Other parts of Mr Gupta’s empire have been showing signs of financial stress for years.
The Financial Times reported in May that he was preparing to call in administrators to oversee the insolvency of Liberty Commodities.
Separately, HMRC filed a winding-up petition against Liberty Pipes, another subsidiary, earlier this month, The Guardian reported.
Follow our channel and never miss an update.
Mr Gupta is said to have explored whether he could persuade the government to step in and support SSUK using the legislation enacted to take control of British Steel’s operations.
Whitehall insiders told Sky News in May that Mr Gupta’s overtures had been rebuffed.
He had previously sought government aid during the pandemic but that plea was also rejected by ministers.
Be the first to get Breaking News
Install the Sky News app for free
SSUK, which also operates from a site in Bolton, Lancashire, makes highly engineered steel products for use in sectors such as aerospace, automotive and oil and gas.
The company said earlier this year that it had invested nearly £200m in the last five years into the UK steel industry, but had faced “significant challenges due to soaring energy costs and an over-reliance on cheap imports, negatively impacting the performance of all UK steel companies”.
