More Liberty Steel suppliers hastily cut exposure

More suppliers to Liberty Steel's European integrated plants are reducing their exposure to the group through commercial means, according to sources close to the company.

The suppliers want to reduce or exit positions as quickly as possible given the widespread focus on the group's finances. Speculation continues to swirl around the group, and particularly some of its lossmaking UK businesses.

"While the group as a whole is performing well operationally, there are some exceptions and I'm sorry to say that includes some of our UK steel businesses," Liberty owner Sanjeev Gupta told UK unions at a meeting today.

He admitted that a loss of funding because of the collapse of major lender Greensill Capital has created a "challenging situation".

Liberty's Speciality Steels business in Yorkshire is coming under the keenest focus, as it was already suffering from a 60pc drop in aerospace demand caused by Covid-19. "As part of the prudent steps we are taking to manage cash, we are discussing new opportunities with customers and suppliers to improve cash flow and looking to secure additional working capital facilities to support the business," the company said.

Customers, including one original equipment manufacturer, are being asked to pay cash upfront to enable the business to keep trading, according to sources.

But the power provider to Speciality Steels has a credit insurance policy that will expire imminently.

Court documents from Greensill's administration hearing in the UK High Court said the Gupta Family Group Alliance (GFG), a loose collection of companies including Liberty, wrote in a letter on 7 February that it would collapse into insolvency if the lender went into administration. "In recent weeks, GFG has been particularly reliant on GCUK's [Greensill Capital UK's] ‘future accounts receivable finance' programme, whereby GCUK provided funding to GFG against expected future invoices," the document said.

Liberty said it had "adequate" funding for its current needs, and that "discussions to secure alternative long-term funding are progressing well but will take some time to organise".

Some sources suggest Sanjeev Gupta will try and find a buyer for the debt owed to Greensill — now in the hands of administrators Grant Thornton — at a knockdown price, which would improve the group's cash flow and balance sheet.

By Colin Richardson