Although bailing out of companies is not the primary duty of an elected government, bailing out the struggling steel industry of UK is surely a responsibility entrusted with the government.
Indian-born British millionaire’s rescue effort of his Steel empire, enlisting what he called a ‘barrage of lawyers’ to support could be analysed in the context of salvaging the British Steel Industry as Gupta’s GFG Alliance is one of the major players in the Industry.
Emergency negotiations
Currently, Gupta’s GFG Alliance, owning Liberty Steel in the UK, is in emergency negotiations to secure new financing and to save 5,000 British jobs. The crisis started with Gupta’s GFG Alliance’ biggest lender threatens to withdraw funding.
The affair turned sour, when the Credit Suisse, the Swiss bank that gave $10billion in funding to Greensill, has petitioned a winding-up order on GFG’s commodities trading business.
However, Gupta – who last week admitted he owes billions – has given a rather offensive response, from his home in Dubai: ‘We have our legal defences ready. There is a barrage of lawyers who are readying up all their guns to fight this off.’
He said lenders risked hurting their own interests by calling in loans before the financing was complete. He added: ‘Damaging the business is not in the interest of anybody, especially not the lenders. What they are doing is not logical and the arguments were made to them very robustly that they are damaging their own stakeholders, their own recovery prospects.’
Supply chain finance firm Greensill, which appointed former Prime Minister David Cameron as an adviser, fell into administration last month. Gupta has been scrambling to refinance the billions Liberty Steel owed Greensill.
Concerns have been expressed that Gupta’s sprawling empire is cloudy and murky and that it would be difficult to rescue in its current form.
However, Gupta who was educated at Trinity College Cambridge, said in an interview with The Weekend Australian newspaper: ‘There is a lot of interest in refinancing, given the strength of our businesses and the strength of the market. But given the noise on top of that and the surrounding situation, things need to settle down and we need a little time to get that refinancing organised.’
He added: ‘My UK steel initiative has always been a labour of love. The UK industry has been decimated over the last few decades. Every single plant I bought was closed or closing.’
Among other things, he has publicly vowed that he will not close plants under his watch. ‘It is my commitment to my people. I repeated that very clearly, that I would not let them down, they don’t have to worry about their futures,’ he said.
Although Steel Prices are high, the industry is saddled with a host of other issues.
UK government to finance?
According to Financial Times of UK, the UK government is willing to support Liberty Steel’s UK assets in their “entirety” as Britain’s third-largest steelmaker staggers on the edge of collapse, endangering 3,000 jobs.
Kwasi Kwarteng, the business secretary, on Thursday told MPs he was assessing how the company, the main subsidiary of conglomerate GFG Alliance, could receive state help.
Kwarteng said the government was “looking at all options to see what we can do” to protect jobs at the company’s UK operations.
“The company has a range of assets, spread across England and Wales in particular, and we’re looking very closely at what specific assets, what specific jobs are necessary and we hope to support the company in its entirety,” he said in the House of Commons.
Liberty has about 3,000 employees in the UK at 12 locations, including sites in Rotherham, Stocksbridge, Motherwell, Newport and Hartlepool. It also has steel plants in France, Eastern Europe, the US and Australia.
Last week Paris said it was extending a €20m loan to Liberty, which would be ringfenced and used to support the Hayange and Ascoval sites in northern France that the company bought last year.
According to the Financial Times, the UK government plans to rescue Liberty in an arrangement similar to that of a temporary quasi-nationalisation, a plan deployed to save British Steel two years ago. On that instance ministers agreed to indemnify the Official Receiver, racking up nearly £600m of costs to taxpayers, before the company was bought by Jingye of China 10 months later.
In the UK, some of Liberty’s plants face difficulties, in its speciality steel businesses that supplies for aerospace and oil and gas customers due to Covid-induced economic construction in these sectors.
Greensill Capital and David Cameron
According to Financial Times of UK, David Cameron lobbied the UK government to increase Greensill Capital’s access to state-backed emergency Covid-19 loan schemes, months before the finance company collapsed.
The former UK prime minister, who became an adviser to Greensill in 2018, pressurised his former colleagues to give the company a bigger role in programmes aimed at keeping credit flowing to pandemic-hit businesses.
Treasury officials were reluctant to include Greensill in the Bank of England’s Covid Corporate Financing Facility, despite the finance group’s claim that it, “concerns about their eligibility for the CCFF were misplaced or could be addressed”, according to the records released under the Freedom of Information Act.
Be that as it may, the UK government has a bounding responsibility to rescue peoples’ jobs in a vital sector such as that of the UK’s Steel Industry, particularly, in the context of Covid-induced economic contraction.
It is obvious, that the UK could hardly afford to shirk its responsibility as the last rescuer to save its Steel Industry and its major players, irrespective of the fact, that UK may or may not rescue the troubled GFG Alliance and Gupta’s prolific steel empire.
