Citibank has been given the go-ahead for a court bid to shut down three UK companies in Sanjeev Gupta’s GFG Alliance, a move that would hit large swaths of the metals magnate’s British operations and put hundreds of jobs at risk.
The bank, acting on behalf of creditors including Credit Suisse, is seeking to shut down the companies over unpaid debts.
The petitions were first made in March 2021 but had been on hold while Credit Suisse held settlement talks with GFG. Those talks stalled, triggering the start of the insolvency proceedings.
In a London court judgment on Tuesday, a High Court judge found measures designed to protect companies forced into difficulty because of the coronavirus pandemic do not apply.
The bank’s winding-up petitions apply to Speciality Steel, Liberty Commodities and a third GFG business, Liberty MDR Treasury Company. The hearing was held last month.
The ruling does not mean the GFG companies are certain to be shut down but it piles significant pressure on Sanjeev Gupta, who has been fighting for the future of his industrials empire since the collapse of its main lender, Greensill Capital, last year.
Credit Suisse investors are owed more than $1bn by GFG, which borrowed money from a group of supply chain finance funds linked to Greensill. In total, Gupta borrowed $5bn from Greensill to finance the growth of a sprawling metals empire that employs thousands of workers around the world.
Liberty Speciality Steel UK, the largest entity that could be wound down, employs more than 1,800 people across several sites in the UK, including at Rotherham in Yorkshire. The company manufactures specialist steel products for the aerospace automotive and engineering industries.
Speciality Steel owes £46.8mn to Citibank, according to the court documents. MDR owes £20mn and Liberty Commodities owes $131.6mn, the court judgment says.
The industrialist had argued in a witness statement that the pandemic had a “significant adverse financial effect” on each of the businesses in question.
A spokesperson for GFG insisted that the judgment “does not mean that the UK companies in question will be wound up”.
“Any further hearing would likely be in autumn or winter this year at which the merits of the winding up proceedings will be heard in their own right,” the spokesperson added, noting that the company will defend its position “vigorously”.
Meanwhile, talks on a “consensual debt restructuring” were continuing, he said. “Despite some market headwinds, our core businesses remain profitable and are operationally strong.”
Additional reporting by Owen Walker