29 March 2021

International fallout from Greensill failure

Concerns for the future of Liberty Steel and its 3,000 UK workers have grown after the UK government rejected its parent company's plea for a £170mln rescue loan.

© Ricardo Gomez Angel/Unsplash

Liberty Steel, part of Sanjeev Gupta’s business group, has been seeking extra funding since the collapse of financial backer, Greensill Capital. Greensill Capital filed for bankruptcy protection in the UK and Australia this month, citing a US$5bln exposure Gupta’s GFG Alliance. It said Gupta’s firms had begun to default on obligations.

In the UK focus has been on the links of former Prime Minister David Cameron to the banker behind Greensill, Lex Greensill. As well as implications for the UK, questions and knock on effects are being felt across Europe.

France is investigating the circumstances of a ‘missing’ Greensill loan to an aluminium smelting plant linked to Gupta’s GFG Alliance Ltd. The case relates to a state-backed loan worth about 18mln euros provided to Liberty Alumnium Poitou.

According to local newspaper La Nouvelle Republique, the Liberty Aluminium Poitou smelting plant received the loan in December 2020 but Greensill then requested the money be sent back in line with a two-month waiting period on such loans. The funds were not returned to the plant, the newspaper reports.

Earlier in March, the French state provided a 20mln-euro loan for the Ascoval steelworks, which is owned by Gupta’s Liberty Steel.

German cities look likely to lose investments as part of the Greensill fallout. Monheim-am-Rhein has a tax excess which it invested in funds at Greensill Bank, whose operations were frozen in early March by German financial watchdog BaFin over potential balance sheet manipulation. Days later, London-based owner Greensill Capital filed for insolvency.

It is unlikely the funds will be recovered as the lender was not covered by deposit insurance. At least 50 other municipalities are believed to have invested a total of at least US$600mln with Greensill Bank.

Galvanized steel
Italy recently guaranteed 86mln euro Greensill loan to Gupta's Liberty Magona SRL, under Covid measures. Liberty Magona makes galvanized steel, said the three-year loan was taken out in late August 2020 to strengthen its finances due to weak demand as a result of the pandemic.

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