Sanjeev Gupta’s GFG Alliance faces the prospect of bankruptcy after its main creditor, Credit Suisse, exited negotiations with the steel business over repayment of its debts.
GFG Alliance is set to face an insolvency hearing next week after Credit Suisse, pulled out of settlement negotiations, the Financial Times first reported.
Under UK laws, creditors can request courts shut down companies that owe them money, if they are able to show those companies cannot pay.
The hearing comes after Credit Suisse, which is owed more than $1bn by GFG, pulled out of negotiations with Gupata’s embattled steel empire, after the UK’s Serious Fraud Office (SFO) served the business with a Section 2 notice and the firm’s offices were raided by French police.
The preliminary hearing on Tuesday will seek to determine whether the problems with GFG Alliance are linked to Covid, or whether they instead are the result of deeper problems with the firm.
The hearing comes after Credit Suisse invest $10bn (£8bn) of its clients money into investment products from collapsed financier Greensill Capital.
Credit Suisse has previously granted extensions to GFG Alliance on a number of separate occaisons. The Swiss bank has however become frustrated with the lack of progress being shown by Gupta’s firm, sources told the Financial Times.
Although GFG paid Credit Suisse $274m from its Australian business, much of the remaining £1bn sum is owed by GFG’s struggling UK business, which Credit Suisse has deemed almost worthless.
A GFG Alliance spokesperson told City A.M. “Our core international businesses continue to generate strong returns and achieve record production levels.”
“We remain committed to repaying all creditors and continue to make positive progress toward a consensual debt restructuring that’s in the best interest of all stakeholders”