The metals tycoon Sanjeev Gupta is plotting to hand control of his remaining UK steel operations to his family in a bid to stave off their collapse into compulsory liquidation and a government-orchestrated fire-sale.
Sky News has learnt that Mr Gupta is proposing to refinance the business through a pre-pack administration that would result in Liberty Steel’s Speciality Steels UK (SSUK) being owned by a trust-like structure set up for the benefit of his family.
The disclosure comes amid deepening uncertainty about the fate of SSUK, which employs nearly 1,500 people at sites in Rotherham and several other locations across South Yorkshire.
Behind Tata Steel and British Steel, it is the third-largest steel producer in the country.
At a hearing at the High Court in London on Wednesday, it was confirmed that the government was preparing to step in and oversee an insolvency of Mr Gupta’s remaining UK steel business, as Sky News reported last weekend.
The connected pre-pack administration of SSUK planned by Mr Gupta would result in it ridding itself of hundreds of millions of pounds of tax and other liabilities.
Begbies Traynor, the accountancy firm, is working on efforts to progress the pre-pack deal.
Surprise rise in inflation as summer travel pushes up air fares
Money latest: Tesco to raise the price of its meal deal from tomorrow
Why we’re seeing double digit price rises in food shop staples
If the petition to have SSUK placed into compulsory liquidation is made, a special manager would be appointed by the Official Receiver to run the operations.
A letter from the Department for Business and Trade, which was referred to in court on Wednesday, stated that “the Official Receiver is prepared, should SSUK enter into compulsory liquidation, to take control of SSUK’s affairs”.
“[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 steelmaking,” the letter said.
One source close to the situation claimed that the ownership structure devised by Mr Gupta would be independent, ring-fenced from him and have “robust standards of governance” – although that suggestion is likely to be viewed with extreme suspicion by observers of his once-sprawling global operations.
The source added that Mr Gupta could also use that structure to seek to buy back SSUK from the Official Receiver, with the steelmaking operations’ fate expected to be determined at a second court hearing in as many days, scheduled for Thursday.
Mr Gupta is understood to have referred in a witness statement to the court on Wednesday to being in “advanced” equity funding talks with Fidera Group, a London-based investment firm which specialises in distressed corporate and asset-backed deals.
Fidera declined to comment, although a source close to the firm played down suggestions that it would participate in Mr Gupta’s bid to retain his grip on SSUK.
Earlier this week, Sky News revealed that BlackRock, the world’s largest asset manager, had provided a financing support letter with a commitment believed to be up to £75m to Liberty Steel UK in the form of an asset-based loan.
Mr Gupta’s pre-pack plan faced stiff opposition in court from the petitioner, the collapsed invoice financing firm Greensill Capital UK, which had financed billions of pounds of loans to Liberty Steel’s parent, GFG Alliance.
UBS, the investment bank which rescued Credit Suisse, a major backer of Greensill Capital, is also a creditor of the company.
A Liberty Steel spokesperson said on Wednesday: “Liberty’s shareholder has invested nearly £200m, recognising the vital role steel plays in supplying the UK’s strategic defence, aerospace and energy industries.
“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 Department for Business and Trade said following Wednesday’s hearing: “We continue to closely monitor developments around Liberty Steel, including any public hearings, which are a matter for the company.
“We are supporting the Official Receiver so that they are prepared to take the necessary steps should the company enter into compulsory liquidation.”
Other parts of Mr Gupta’s empire have been showing signs of financial stress for years.
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.
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 faced “significant challenges due to soaring energy costs and an over-reliance on cheap imports, negatively impacting the performance of all UK steel companies”.
