Sanjeev Gupta in talks to negotiate reprieve on Greensill Capital debt

Sanjeev Gupta’s GFG Alliance is battling to negotiate a repr­ieve on its debt obligations to Greensill Capital as the unraveling of its biggest lender threatens to take down the metals group.
 
A debt standstill agreement with Greensill, which filed for administration on Monday, would help GFG stave off insolvency and avoid an asset fire sale, according to people familiar with the matter, who asked not to be named because the talks are private. Gupta is separately seeking to raise new financing to replace Greensill’s loans, they said.
 
The abrupt collapse of Lex Greensill’s business has shuttered funds run by Credit Suisse Group AG and forced Japan’s SoftBank Group Corp. to write down its $1.5 billion in­v­estment in the supply-chain finance firm. Now it risks dragging down GFG, with governments from London to Paris monitoring the threat to 35,000 jobs across a business that sp­ans steel to renewable energy.

 

In the UK, Prime Minister Boris Johnson’s administration is in constant contact with Gupta’s steel division over the impact on British factories and jobs, a person with knowledge of the matter said. GFG em­ploys about 5,500 people across the UK, including at an aluminum smelter in Scotland. In France, Finance Minister Bru­no Le Maire said the government would support GFG emp­loyees and its industrial sites, if Greensill’s difficulties jeopardized them.
 
GFG “started to default on its obligations” after Greensill stopped lending to the group at the beginning of March, according to court documents. Greensill’s exposure to the metals group was $5 billion, one of the people said.

 
UK unions met with GFG executives on Tuesday amid fears of job losses across Gup­ta’s empire. The Indian-born former commodities trader had previously been called the “savior of steel” for his tendency to buy unloved mills and smelters. GFG, a loose group of companies he owns, spans 30 countries. “While Greensill’s difficulties have created a challenging situation, we have adequate funding for our current needs,” GFG said in an emailed statement, adding that attempts to secure alternative financing “will take some time to organize.”
 
The negotiations on a debt reprieve may not lead to a deal, the people said. Partners at Grant Thornton were appo­inted as joint administrators of Greensill on Monday. A spokesperson for Grant Thornton declined to comment.

 
The collapse of Lex Gree­nsill’s eponymous firm has cast a shadow over Gupta’s business, which relied heavily on its funding for a $6 billion acqu­isition spree over five years. In Monday’s court filing, Greensill said that its largest customer by value has fallen into “severe financial difficulty,” and had warned last month it faced insolvency without its funding.
 
The news that Greensill has filed for administration is “extremely concerning to the unions and the workforce,” a spokesperson for the U.K.’s National Trade Union Steel Coordinating Committee said. “Government must take an active role to facilitate a comprehensive solution.”

 
The Australian Workers’ Union has been meeting with management at GFG’s Whyalla steelworks in South Australia on a rolling basis, National Secretary Daniel Walton said in an emailed statement.
 
GFG took ownership of Whyalla in 2017 with a bold plan to increase production and invest in renewable power to reduce energy costs. The ste­elworks are now profitable and the global prospects for steel demand are good, Walton said.
 
A spokesperson for Austr­alia’s Industry Minister Karen Andrews said the government was “monitoring the situation closely,” though declined to comment further about the potential impact of Greensill’s difficulties.