Liberty Steel owner Sanjeev Gupta said his business owed “many billions” of pounds to failed lender Greensill Capital but he expected other financiers to back him.
Yep, it is.
The background – Greensill used to pay Gupta’s suppliers then wait for Gupta to get paid. Reverse invoice financing, nowt wrong with that. However, Gupta’s customers used to pay Gupta, who would then pay Greensill. Greensill is now bust and Gupta isn’t passing the money along as he gets it. Logical thing to do really – the administrators can wait after all.
He said his GFG Alliance business was using “self-help” measures to shore up its balance sheet while attempting to secure longer-term refinancing.
That’s what the self-help is. Collecting on sales and not passing along the amount that Greensill financed. This frees up cash to be paid on the more direct purchase of supplies to make the next lot of steel.
Essentially, Gupta was financing working capital through Greensill. Again, nowt wrong with that. Now that Greensill isn’t being paid Gupta has a bolus of working capital. Perhaps a little sharp there but understandable.
Mr Gupta’s first public comments since the collapse of his key funder came as his sprawling steel empire teeters on the brink after creditors sought a court application to wind up one of his businesses.
Bankers acting for Credit Suisse filed papers in the insolvency court to shut down Mr Gupta’s trading arm Liberty Commodities following the collapse of Greensill earlier this month.
And then there’s the problem. That bolus of working capital does actually belong to other folks and they’d rather like to have it. They’ll get it too – or Gupta will be bust.
Effectively Gupta has to refinance his working capital before the courts catch up.
Note that this is all assuming that there is a real and viable business in here. Even if all is entirely and wholly ticketty boo he’s still got this problem.