The turnaround fund that backed Monarch Airlines has defended a policy to wedge some of the British Steel plants it bought for £1 with over £150m of high interest debt.
Annual accounts filed last Tuesday revealed Greybull Capital made a loan of £154m to British Steel Holdings Limited – the firm that owns the expansive Scunthorpe steelworks and a 50 per cent in the Redcar Bulk Terminal port.
With interest on the loan of nine per cent plus Libor, British Steel is facing an annual bill of over £16m to service the debt. The loan plus outstanding interest is to be repaid in full in November 2019.
Greybull has faced criticism over allegations it managed to insulate itself from the failure of Monarch and the £165m of loans it injected into the airline one year before its failure but a complex network of loans.
However, in the case of British Steel, Greybull insisted that other than £3m in fees it has not received any dividends, interest or loan repayments.
In a statement, the turnaround firm said the rate of interest on the loans was "market standard" and asserted that no cash remitted back to Greybull "until such time as the company is more financially robust".
In addition, Greybull highlighted its debt ranked junior to senior bank debt. According to the financial statements, British Steel had £45.8m of bank loans and overdrafts and a further £60m from a secured bank loan at the end of March 2017.
A Greybull spokesperson said the fund was "delighted with the progress that British Steel has made since mid-2016", adding:
It has returned to trading profitably in its first year, hired over 500 new employees and apprentices, completed its first acquisition by acquiring last month FN Steel in Holland, spent over £50m on capital expenditure and acquired a stake in the Redcar Bulk Terminal in Teesside.
We are proud that the employees will share in the success of British Steel through the profit and share ownership schemes that we have put in place.
A spokesperson for British Steel added: "We’ve had nothing but strong support and help from Greybull since they rescued the business a year ago. They’re working with us on our turnaround and we remain pleased with the progress we are making."