company secretary criticizes “financial engineering” at Liberty Steel | Steel industry

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The British business secretary has criticized Sanjeev Gupta’s use of “financial engineering” and debt by Liberty Steel as the steelmaker prepares to sell several factories.

Kwasi Kwarteng said there was “healthy interest” and a “viable future” in the UK factories Liberty Steel has put up for sale, in comments to MPs on Tuesday.

Liberty Steel has been in crisis since March after the collapse of Greensill Capital, a financier who had loaned companies under Gupta’s GFG Alliance banner up to $ 5 billion (£ 3.5 billion). The collapse has sparked a scramble for new lenders as Greensill’s backers try to get their money back.

GFG is also being investigated for suspected fraud, fraudulent trade and money laundering by the Serious Fraud Office. The investigation prompted a US investor to withdraw from a loan deal to GFG, rekindling concerns for the future of 35,000 people around the world, including 3,000 metalworkers in the UK.

Liberty said on Monday it would attempt to sell its Stocksbridge site in South Yorkshire and two smaller facilities as part of a restructuring deal it hopes to strike with Credit Suisse, a backer of Greensill.

Kwarteng told MPs on the business select committee on Tuesday that he believed there would be buyers for the plants.

“Assets are basically good assets, the workforce is skilled and dedicated, the plant managers are very experienced,” Kwarteng said. “But the problem Liberty had […] was about financial engineering, the opaque part, if you will, of GFG. The leverage, the funding, the debt that they had taken on, all of that, I think, put a lot of pressure on these companies.

“Without it, I think there is a healthy interest in the assets and I think they have a viable future.”

Kwarteng said steel mills needed owners with a “more stable structure” rather than a succession of “private equity and financial engineering firms who had very little knowledge or experience in asset management. steel “.

Government officials drew up plans to continue running Liberty Steel’s UK sites in the event of a liquidation, but Kwarteng refused an earlier Liberty request for a £ 170million loan, citing concerns over the opacity of the GFG companies. Kwarteng said his decision was justified by the revelations that followed about various investigations.

He said nationalizing the Liberty Steel factories was the least likely option the government would pursue. The Unite union called for nationalization to be considered.

A spokesperson for the GFG Alliance declined to comment.

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