Greensill Capital has this afternoon filed for administration, potentially putting at risk thousands of jobs in the UK steel industry.
Lawyers for the boutique bank, which is one of the main sources of funding for steel magnate Sanjeev Gupta’s business empire, appeared before a UK court today, the FT reported.
According to court documents, Greensill has “fallen into severe financial distress” and can no longer pay off its debts.
As a result, US investor Apollo Global Management could now sweep in and buy up some of the firm’s businesses.
Accountants Grant Thornton said that it had been appointed as Greensill’s administrator. In a statement, it added that in was in “continued discussion with an interested party in relation to the purchase of certain Greensill Capital assets.”
“As these discussions remain ongoing, it would be inappropriate to comment further at this time.”, it added.
The collapse marks a rapid downfall for the firm, which counted former PM David Cameron among its advisers.
The supply chain finance specialist was thrown into disarray last week when its insurance provider refused to renew a $4.6bn contract.
Shortly thereafter, lender Credit Suisse froze $10bn of funds linked to the firm, leaving it perilously short of cash.
Collapse heaps pressure on Gupta
With Gupta’s GFG Alliance believed to be heavily exposed to the firm, the collapse could have a devastating affect on the UK steel industry.
Up to 5,000 jobs at GFG and subsidiary Liberty Steel could be at risk, with union officials set for crisis talks with the firm tomorrow.
“Sanjeev Gupta needs to tell us exactly what the administration means for Liberty’s UK businesses and how he plans to protect jobs”, union Community said in a statement.
“The future of Liberty’s strategic steel assets must be secured and we are ready to work with all stakeholders to find a solution.”
It was also reported that business secretary Kwasi Kwarteng met with Liberty Steel’s chief executive John Ferriman yesterday.
Nicknamed the “saviour of steel”, Gupta had previously snapped up a number of steel assets in the UK despite uncertainty over the future of the industry.
Liberty Steel currently owns nine steelworks sites in the UK, which employ around 3,000 people. 2,000 more staff work for engineering firms connected to the industry.
But a spokesperson for the company said that the firm was currently running as normal.
“Our operations are running as normal and our core businesses continue to benefit from strong market conditions generating robust sales and cash flows”, they said.
“Our operational efficiency programme has improved profitability and we are making progress in our discussions with financial institutions that can help diversify our funding. We are keeping our employees up to date and will provide further updates as we deliver our plans.”
Mike Hill, Labour MP fo Hartlepool, where one of Liberty’s steelworks is, said: “Liberty Steel is a major employer in Hartlepool, manufacturing bespoke Pipes for use by the offshore oil and gas industry.
“The company has also been identified as a key player in the Government’s plan for a Freeport in Teesside and Hartlepool. The last thing our local economy needs in these difficult times is for the business to go under and urgent intervention from Ministers will be needed if there are any signs of that happening.”
Yesterday the Sunday Telegraph reported that a number of firms were circling in anticipation of a fire sale of Liberty Steel’s assets.
The Hayange steel plant in France, which produces railway tracks for European customers, is said to be high on the list of targets.
The plant was acquired by Liberty Steel in August after regulators prevented British Steel’s new Chinese owners Jingye from taking it over due to concerns about its links to Beijing.
Gupta’s steel empire has been thrown into chaos amid troubles at Greensill, the Australian finance house that is now on the brink of administration.
The British tycoon has a debt pile of roughly £4bn, of which more than £3bn is owed to Greensill, it is understood.
As a result of the cash crunch, Gupta had stopped making repayments to Greensill. City A.M. has contacted the bank for comment.