GFG Alliance facing additional creditor scrutiny
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GFG Alliance facing additional creditor scrutiny

Trading house that was part of metals firms' holding company is latest inquiry target, according to media reports.

April 5, 2021

United Kingdom-based GFG Alliance, which owns steelmakers Liberty Steel and InfraBuild and aluminum producer Alvance, is reportedly the subject of increased inquiries from creditors following up on the collapse of its long-time financial backer Greensill Capital.

According to reports from the Financial Times, Bloomberg, Reuters and the Australian Financial Review, multinational banking firms are increasingly concerned about the authenticity of invoices that provided the supply chain financing GFG used to fund its growth and operations.

According to the Financial Times, much of the scrutiny has shifted to GFG subsidiary Liberty Commodities, a trading office based in Dubai, United Arab Emirates (UAE). The media outlet says auditors examining Greensill Capital’s books has “approached companies that were listed as debtors” and has not always received satisfactory answers.

The publication notes, “Several of these companies have disputed the veracity of the invoices from the [Liberty Commodities] trading firm, according to people familiar with the matter and correspondence seen by the Financial Times.”

A German scrap recycling firm called RPS Siegen GmbH is given as one example that “confirmed to the Financial Times that it had been approached about an outstanding invoice and said that it had not traded with Liberty Commodities.” A spokesperson for RPS Siegen reached by the news organization said he was aware of the trading house but did not have a “trading relationship” with Liberty Commodities.

According to an early April Reuters report, GFG Alliance Chair Sanjeev Gupta continues to insist he has garnered interest from new financing sources while asking creditors not to “pull the plug” on Liberty Steel and the other metals production companies in the GFG portfolio.

Gupta and GFG have not been helped by other recent events in that effort. Credit Suisse, a global bank impacted by the Greensill collapse, also has exposure to the recent Archegos Capital Management margin call crisis.

The Swiss bank seems unlikely to relent on efforts to protect its interests tied to the Greensill fiasco. According to an early April report from Bloomberg, Credit Suisse has been making a push to have Liberty Commodities declared insolvent so its books can be thoroughly examined.

On April 6, the website of the Australian Broadcasting Corp. reported Citibank and Credit Suisse had filed an application in an Australian state court to “wind up the operations” of OneSteel Manufacturing, with the report specifically mentioning the Whyalla steelmaking complex north of Adelaide, Australia. It is unclear how or if that filing would affect the InfraBuild electric arc furnace (EAF) and scrap recycling operations in Australia.

Additionally, the government of the U.K. has rejected a request from Gupta and GFG Alliance for a 170 pounds sterling million ($235 million) loan to help pay the operating costs of Liberty Steel facilities in that nation. The rejection occurred within a few days of the request.

An early April report in the Australian Financial Review, meanwhile, indicates Greensill Bank administrators in Germany are eyeing the InfraBuild steelmaking and scrap recycling assets in Australia as worthy of being seized as collateral by debt-holders in that Greensill Capital subsidiary.

Most GFG Alliance facilities continue to operate as of early April, though governments in several nations and regions reportedly are considering fallback plans should GFG run into cash flow problems substantial enough to idle furnaces.