The owner of Liberty Steel is currently negotiates about a loan facility from California-based investment firm White Oak Global Advisors.
The arrangement is at a initial stage but a skeleton agreement – a so called “term sheet” has been drafted.
Any loan would require the approval of Gupta Family Group’s creditors, including Credit Suisse and Tata Steel.
GFG has been scrambling to find new financing since its major financial backer Greensill Capital went bankrupt in early March, which threw the future of Liberty Steel and its 3,000 workers into doubt. A further 2,000 people work at other GFG steel sites in the UK.
Mr Gupta has already requested the government for £170m of support which has been rejected.
Sources close to the matter inform that the injection of new money would increase the chances of Liberty’s creditors recovering a greater portion of the cash owed to them, as it would potentially let Liberty to return to full production and therefore benefit from higher steel prices.
The agreement is still subject to further due diligence by the lender and there is no guarantee the loan will materialise. White Oak and GFG refused to comment on the matter.
The government has promised to preserve Liberty Steel in some form and says it will consider “all options”. In April, Business Secretary Kwasi Kwarteng said he wanted to give GFG more “time to find finance”.
However, Labour has called for it to step in before the firm collapses, not after, to save thousands of supply chain jobs and millions of pounds.
In the meantime, the clock is ticking as “victims” of the Greensill collapse making their preparations to claim liquidate some of the assets Gupta pledged to Greensill to keep the cash flowing.
Applications to force the liquidation (winding up orders) of three Liberty Steel group companies have been filed and were initially due to be heard by a judge this week.
Insolvency experts are of the view that the winding up orders are the “nuclear option” for creditors trying to get their money back and their very existence will severely hamper Mr Gupta’s own attempts to save the business.
