UK metals tycoon Sanjeev Gupta has hired a trio of financing and restructuring advisers to help his GFG Alliance group of companies negotiate with its main creditor, Greensill Capital, and raise fresh funding, according to people familiar with the matter.
Gupta is currently negotiating a so-called standstill agreement with Greensill to give his companies breathing space over payments on billions of dollars of debt, some of the people said. He also is trying to tap investors and banks for investment, one of the people added.
The efforts come after Greensill, which is among Gupta’s biggest lenders, filed for insolvency protection on 8 March.
To help navigate the fallout, Gupta has hired restructuring specialist Alvarez & Marsal, law firm Norton Rose Fulbright and investment bank PJT Partners, the people said.
Gupta told British union officials on 9 March that Greensill’s difficulties create “a challenging situation which needs careful management,” according to a transcript of his remarks seen by The Wall Street Journal. Gupta added at the online meeting that GFG Alliance has adequate funding, but that it was looking to refinance the business, which could take time.
Greensill had $5bn in loans outstanding to GFG Alliance, according to a person familiar with the relationship.
The standstill agreement is intended to bring the two sides to the negotiating table as each has argued that the other party has started to miss some payments, according to one of the people familiar with the matter.
In a typical supply-chain finance deal, Greensill would pay a company’s suppliers sooner than they would normally expect, but at a discount. The company then would pay Greensill the full amount down the road. But Greensill also paid GFG Alliance companies for future profits on the sale of steel and other products, meaning payments could flow both ways.
Conversations with Greensill are likely to be complex.
One challenge for GFG Alliance will be in understanding Greensill’s structure and what if any other parties have claims on the specialty finance company, the person said. Gaining clarity and agreement on that will help determine the refinancing options GFG Alliance can pursue, the person added.
In his meeting with union officials on 9 March, Gupta said he had told his companies to manage their cash carefully and reduce their reliance on group funding.
A spokesman for GFG Alliance on 10 March said that some businesses would be operating “intermittently.”
Gupta told unions that some of his UK businesses had been lossmaking since a weak market in 2019, and that their poor performance had been compounded last year by uncertainties related to the UK’s exit from the European Union, and more recently the severe downturn in the aerospace sector because of the Covid-19 pandemic.
That has led to a 60% falloff in demand for some products, he said.
This article was published by Dow Jones NEWSPLUS