Update: GFG Alliance makes progress on financing, restructuring

Update: GFG Alliance makes progress on financing, restructuring

Metals producer announces restructuring committee and garners financing interest from a San Francisco-based equity firm.

April 27, 2021

Financially troubled steelmaker and aluminum producer GFG Alliance has reportedly secured financing for some of its facilities in Australia. The U.K.-based conglomerate and its chair Sanjeev Gupta have been seeking new funding sources since the collapse of supply chain financing firm Greensill Capital earlier this year.

An article by U.K.-based The Guardian says GFG Alliance has struck an as yet unfinalized deal to refinance some of the existing Greensill loans. The refinancing will support the Liberty Primary Metals Australia (LPMA) assets, which includes a steel mill in Whyalla, Australia.

The newspaper, citing the Sydney-based Australian Financial Review as its source, says the deal involves San Francisco-based White Oak Global Advisors and could take another month if it is to be finalized. White Oak, on its website, describes itself as providing “customized and efficient capital to support small and middle market businesses with their ever changing financing needs.”

Although the Greensill collapse has opened the door to numerous investigations and lawsuits concerning the finances of GFG Alliance, the company is benefitting from a surge in global demand for steel and aluminum and accompanying record high prices.

A message posted in early May to the GFG website states in part, “Most of GFG Alliance’s businesses across its global portfolio are performing well and generating positive cash flows, supported by the operational improvements we’ve made and strong steel, aluminum and iron ore markets.”

Continues the firm, “In light of Greensill’s collapse, we are taking prudent steps across our global portfolio to manage resources while we bridge to new financing for our businesses. We are in regular dialogue with our employees, unions, customers, suppliers, and governments to keep them informed and to explore ways we can work together through the current situation.”

Separately, the Liberty Steel business unit of GFG has announced the appointment of four new board directors who will form a new Restructuring & Transformation Committee (RTC). States Liberty, “The appointments represent a step forward in Liberty’s response to the collapse of its principal lender, Greensill Capital. Liberty is prudently managing cash across its global operations to ensure it has adequate funding for its current needs while its refinancing is completed.”

The four new directors are: Jeffrey S. Stein as chief restructuring officer, who has held that title previously at three different United States-based companies; Jeff Kabel as chief transformation officer, who has ferrous commodities experience with J.P. Morgan Chase and Koch Industries; Iain Hunter as chief governance officer, whose previous experience includes working with GFG subsidiary Wyelands Bank plc; and Deepak Sogani as Liberty’s new chief financial officer, who has previously served in that role for India-based Jindal Steel.

The four directors and the RTC created will be given “full autonomy to restructure Liberty’s operations to focus on core profitable units, and either fix or sell underperforming units,” states Liberty.

The search for alternative financing to replace the Greensill supply chain-related methods has been the focus of GFG Alliance management efforts throughout April and early May. An April 27 online article by BBC Business Editor Simon Jack says in part that “time is running out” for the alternative financing search, as creditors affected by the Greensill collapse “prepare their claims to liquidate some of the assets Gupta pledged to Greensill to keep the cash flowing.”

Adds Jack, “Applications to compel the liquidation (winding-up orders) of three Liberty Steel group companies have been filed and were originally due to be heard by a judge next week.”

One veteran of that winding-up process tells BBC such petitions “are one of the most aggressive steps in a creditors' armory—they can lead to the end of a company’s life and carry other very draconian legal consequences.”

The article notes that while Gupta and GFG spokespersons have cited weakness in the aerospace sector as the cause of the company's woes, sources not identified by the BBC indicate “the creditors’ real concern is [that] no one seems to be able to locate £3 billion ($4.1 billion) that creditors allege Greensill advanced to Gupta and remains unpaid and unaccounted for.”

In the meantime, government officials and labor union leaders in the United Kingdom, Australia, France, India and the United States are monitoring the status of steel mills, aluminum smelters and scrap recycling yards that are part of the GFG Alliance global portfolio.

In the U.K., the BBC says it has spoken to government sources who indicate the government there is leaning toward letting the firm become insolvent, so they can rescue “the bits of Gupta's empire they want to save.”