Credit Suisse Targets Liquidation Orders for Gupta Liberty Branch | Swiss credit
Credit Suisse has taken legal action to bankrupt a $ 4 billion trading firm owned by metals magnate Sanjeev Gupta as he tries to recoup his losses.
Gupta is the founder of Liberty Steel and its holding company, GFG Alliance. The latter has pledged to fight the legal petition, which poses a new threat to the Gupta Metals Empire and the 5,000 people it employs across the UK.
Bank Credit Suisse has reportedly asked the directors to file liquidation orders against Liberty Commodities Limited with a London insolvency court. The action was brought by a unit of another bank, Citigroup, which was acting on instructions from Credit Suisse.
Liberty Commodities is one of the main units of Gupta’s metals trading arm and specializes in the trading of non-ferrous metals and steel. It has $ 4.2 billion in revenue through March 2020 and has 13 employees, according to company documents. Before embarking on metals manufacturing, Gupta made his fortune in commodity trading.
GFG Alliance has relied heavily on loans from supply chain finance firm Greensill Capital, which was declared insolvent this month. GFG owed Greensill £ 3.6 billion before its collapse, but has suspended repayment of those loans.
Gupta is trying to negotiate a “standstill” agreement with Greensill’s creditors, which would allow his company to raise alternative financing.
Greensill specializes in loans to help large companies pay their suppliers. He controversially raised funds by bundling these loans and selling them to banks like Credit Suisse, who then marketed them as low-risk investments to high net worth clients. The system was based on insurance contracts that guaranteed investors would get paid, even if companies, like Liberty, which borrowed money from Greensill, defaulted on repayment.
Greensill was plunged into crisis after insurers, and later Credit Suisse, withdrew their support in early March, citing concerns about the company’s management and the growing stack of complex loans linked to the ‘GFG Alliance.
In Germany, a subsidiary of Greensill is facing criminal prosecution by the financial regulator, which has raised concerns about the manipulation of balance sheets. Greensill denies any wrongdoing.
Credit Suisse has now shut down its nearly $ 10bn (£ 7.2bn) Greensill-linked investment funds, and has made a relentless attempt to recover funds for its investors, handing over so far $ 3.1 billion.
The bank has warned it will likely suffer a financial blow from the Greensill collapse. He managed to get around $ 50 million back through Greensill’s trustees Grant Thornton linked to a $ 140 million bridging loan he made to Greensill last year.
The bank’s liquidation order targeting Liberty Commodities is part of its latest effort to recover funds, including for fund investors. Documents filed by the UK registered company show that it has a charge on its assets from a creditor, Greensill Capital (UK) Limited.
A spokesperson for GFG Alliance said the company was in “constructive discussions” with Grant Thornton “to negotiate a consensual and amicable solution on the way forward, which is in the best interests of all stakeholders.”
“While this is happening, we will vigorously defend any legal action on the grounds that we have a three-year committed facility with Greensill. This dispute will take several months to go to court, and in the meantime, we are working hard to take prudent steps to manage our cash flow and refinance our business, ”added GFG.
GFG has reportedly engaged Alvarez & Marsal and PJT Partners to advise them on efforts to identify new sources of funding to replace Greensill loans.
Gupta approached the UK government for a £ 170million government bailout last week, but was turned down due to concerns over GFG Alliance’s lack of transparency and fears the money had been used to fund its international operations.
GFG Alliance operates in 30 countries and employs around 35,000 people. Liberty Commodities is one of Gupta’s main business units.
Business Secretary Kwasi Kwarteng said all options were on the table in an attempt to save Liberty Steel and its 3,000 British workers, as well as the 10,000 jobs dependent on the company throughout its chain of business. supply.
The unions have urged the government to make the UK company public property.
Liberty Steel said on Monday that it plans to restart steel production next week, after halting production at some UK factories, including Rotherham, since March 12.
“Most of GFG Alliance’s activities in its global portfolio are performing well and generating positive cash flow, supported by the operational improvements we have made and strong markets for steel, aluminum and iron ore” , said a spokesperson for GFG.
Credit Suisse and Citigroup declined to comment.