Thursday, 11 August, 2022
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Greensill, Gupta and the fragile tower of money and metal

The collapse of Greensill Capital has cast a shadow over Sanjeev Gupta’s business, which relied heavily on its funding for a spree of acquisitions that saw him spend $6 bn in 5 years.

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Bloomberg: Sanjeev Gupta’s GFG Alliance is in talks to negotiate a reprieve on its debt obligations to Greensill Capital and prevent a rapid collapse of the metals group that’s been shaken by the unraveling of its biggest lender.

A standstill agreement with Greensill, which filed for administration on Monday, would help the metal magnate’s group stave off insolvency and avoid an asset fire sale, according to people familiar with the matter, who asked not to be named because the talks are private. Gupta is separately seeking to raise new financing to replace Greensill’s loans, they said.

Governments are keenly watching for the fallout from GFG. In the UK, Prime Minister Boris Johnson’s administration is in constant contact with Gupta’s steel division over the impact on British factories and jobs, a person with knowledge of the matter said. In France, Finance Minister Bruno Le Maire said the government would support employees of GFG’s industrial sites.

Greensill stopped lending to GFG at the beginning of March, according to court documents. Since then, GFG has “started to default on its obligations,” the filings stated. Greensill had a $5 billion exposure to the metals group, one of the people said.

U.K. unions met with GFG executives on Tuesday amid fears of job losses across Gupta’s vast empire. The Indian-born former commodities trader had previously been called the “savior of steel” for his tendency to buy unloved mills and smelters. His GFG Alliance, a loose group of companies he owns, spans 30 countries, employing 35,000 people.

The meeting with unions was “productive,” GFG said in an emailed statement. “While Greensill’s difficulties have created a challenging situation, we have adequate funding for our current needs,” it said, adding that attempts to secure alternative financing “will take some time to organize.”

The negotiations on a reprieve on debt are ongoing and may not lead to a deal, the people said. Partners at Grant Thornton were appointed as joint administrators of Greensill on Monday.

A spokesperson for Grant Thornton declined to comment.

The collapse of Lex Greensill’s eponymous firm has cast a shadow over Gupta’s business, which relied heavily on its funding for a spree of acquisitions that saw him spend $6 billion in just five years. In Monday’s court filing, Greensill said that its largest customer by value has fallen into “severe financial difficulty,” and had warned last month it faced insolvency without its funding.

The news that Greensill has filed for administration is “extremely concerning to the unions and the workforce,” a spokesperson for the U.K.’s National Trade Union Steel Coordinating Committee said. “Government must take an active role to facilitate a comprehensive solution.” – Bloomberg


Also read: Indian steel industry was heavily protected, but Budget 2021 has changed that. Here’s why 


 

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