Sanjeev Gupta denied $307m bailout for GFG Alliance from British government
Sanjeev Gupta’s GFG Alliance has reportedly been denied a £170m ($307m) emergency bailout from the British government.
Sanjeev Gupta’s GFG Alliance has reportedly been denied a £170m ($307m) emergency bailout by the British government, which it sought as it looks to avoid a similar fate to that of its biggest financial backer, Greensill Capital, which spectacularly collapsed earlier this month.
The request follows intense discussions between the British government and GFG’s Liberty Steel, the nation’s third-largest steelmaker, in the wake of Greensill diving into administration after Mr Gupta withheld payments worth $US5bn ($6.5bn) to the financier.
The £170m bailout would fund working capital and additional operating losses, the metals magnate is reported to have written in a letter sent late last week.
But the British government wrote back to Mr Gupta formally rejecting the request last week due to multiple concerns, the Financial Times has reported, citing people familiar with the situation.
Liberty Steel employees 3000 people across Britain, with GFG employing a further 2000 in the country across its other divisions. Amid fears of its imminent collapse, unions have urged the government to step in to save jobs and secure the steelmaker’s future.
Mr Gupta is understood to owe $2bn to lenders and bondholders in addition to the funds owed to Greensill.
The desperate move raises questions over the viability of GFG’s Australian businesses, including steelmaker InfraBuild and the Whyalla steelworks.
While Mr Gupta is understood to have not yet made any similar bailout requests to the federal government, Industry Minister Karen Andrews said events were being closely watched.
“It would not be appropriate for the government to speculate about the finances of a private company,” she told The Australian. “However, we are closely monitoring the situation, and working across government, given the value of the Whyalla Steelworks to the broader community, not just its direct employees.”
The federal government was in close contact with the South Australian government, and in regular conversation with GFG, including directly with Mr Gupta, she added.
“Our government has always been a strong supporter of the Whyalla Steelworks, including through contracts to supply steel for our $10 billion Inland Rail Project,” she said.
A spokesman for GFG’s Australian division declined to comment.
The request for assistance in Britain comes after crossbench senator Rex Patrick last week said taxpayer money should not be used to prop up Mr Gupta’s struggling conglomerate.
Senator Patrick told The Australian he feared for the fate of GFG and worried that Mr Gupta “won’t pull through this”.
“There are lots and lots of complications. I’m just not confident that he will have the ability that he will pull through this. It’s for that reason that I went to Whyalla on the weekend to talk to locals about what needs to be considered in the event where a supplier who simply says something like ‘I’m not going to provide you with these components to fix the coke ovens until such time that I am paid upfront’.”
“The situation at Whyalla is you cannot shut the coke ovens down, you cannot shut the blast furnaces down or they will never reopen,” he said.
While Senator Patrick argued Whyalla should not be allowed to fail, he stressed that taxpayers should not prop up Mr Gupta’s operations.
“You cannot inject taxpayers’ money into that organisation given the uncertainty that surrounds it. A better option might be to let the facility fall into administration and then the commonwealth take a much more active role,” he said.
Additional reporting: Jared Lynch
Perry Williams
