Gupta’s GFG in talks to secure new finance deal
Sanjeev Gupta: talks
Talks are ongoing to salvage entrepreneur Sanjeev Gupta’s metals empire as attention focuses on the Scottish government’s exposure to its mounting debts.
Mr Gupta’s GFG Alliance, embracing a sprawling global network of steel and aluminium plants, is said to be negotiating a new line of finance following the collapse on Monday of its lender Greensill Capital into administration.
With no certainty that alternative funding will be forthcoming, there are fears for 5,500 jobs in British plants, including those in Motherwell and at an aluminium smelter in Lochaber.
The smelter and a hydroelectric station were acquired for £330 million from Rio Tinto in 2016.
Opposition MSPs are being asked to clarify the scope of a £500m+ guarantee the Scottish government provided to Mr Gupta at the time to support and expand the Lochaber plant shortly after his Liberty Steel group acquired the Dalzell and Clydebridge works in Lanarkshire.
The smelter in Lochaber
Murdo Fraser, the finance spokesman for the Scottish Tories, has called on Kate Forbes, the Finance Secretary to “provide urgent clarity, specifically in relation to how much taxpayers’ money may be at risk and what is being done to address that.”
Mr Fraser added: “They must explain what is going on, the terms of these agreements and do everything possible to insulate public funds from unnecessary loss.”
The Scottish government was applauded at the time for protecting almost 200 jobs in the Highlands and giving the plant a viable future. Further jobs were created and the plant has since been expanded.
But the terms of the 25-year financial guarantee for payments from the smelter to the power plant have not been disclosed, with the government citing “commercial confidentiality.”
The agreement was signed off by the Scottish Parliament’s cross-party financial committee, whose membership included Mr Fraser. He is now asking the government to publicly “quantify” the current risk to the taxpayer should the guarantee be called upon.
While the Mr Fraser raised questions about the government’s handling of the transaction, one of his Tory colleagues urged the SNP administration to explore all options to resolve the current crisis.
Conservative Highlands and Islands MSP Jamie Halcro Johnston said: “A matter of weeks ago came the positive news of an expansion at the Lochaber site so this has come as a real shock.
“It is a vital local industry which employs almost 200 workers and its incumbent on the SNP to explore all options to ensure the survival of this site and those in Motherwell and elsewhere in the UK. We need to do everything possible to preserve jobs.”
Scottish Liberal Democrat leader Willie Rennie said: “When the Government provided guarantees in December 2016, they made big promises about a shining future for the Lochaber smelter. Now it seems that the smelter’s parent firm are in trouble and Scottish taxpayers could be on the hook.
“Just as with the BiFab yards in Fife, the Scottish Government are good at handing out money to financiers and hopeless at providing high wage, highly skilled jobs for Scottish workers.
“The Economy Secretary needs to come to Parliament and explain what’s next for workers and taxpayers.”
Trade unions have been meeting with Mr Gupta to seek assurances on the viability of the business and future of jobs.
The abrupt collapse of Lex Greensill’s business has shuttered funds run by Credit Suisse Group and forced Japan’s SoftBank Group to write down its $1.5 billion investment in the supply-chain finance firm. Now it risks dragging down GFG, with governments from London to Paris monitoring the threat to 35,000 jobs.
The UK government said it is in constant contact with the steel division over the impact on British factories and jobs.
In France, Finance Minister Bruno Le Maire said the government would support GFG employees and its industrial sites, if Greensill’s difficulties jeopardised them.
GFG insisted it has enough money to safeguard its businesses and said it is seeking a a reprieve on its debt obligations to Greensill Capital. A debt standstill agreement would help GFG stave off insolvency and avoid an asset fire sale.
A spokesperson for the Scottish government told Bloomberg last week: “Funding sources available to the GFG Alliance are commercial matters for the business.
“The Scottish government has a comprehensive security package relating to the guarantee Scottish ministers provided to the Lochaber aluminium smelter in 2016.”