Business editor, News
/Spencer StokesThe UK’s third-largest steelworks has been placed under government control, creating an uncertain future for nearly 1,500 workers in Rotherham and Sheffield.
Insolvency courts granted a compulsory winding up order sought by creditors owed hundreds of millions of pounds by Speciality Steels UK (SSUK) – part of the Liberty Steel metals empire of controversial tycoon Sanjeev Gupta.
The company will now be placed in the hands of the official receiver – a government financial caretaker – and special managers from consultancy firm Teneo.
The government has agreed to cover the ongoing wages and costs of the plant while a buyer for is sought.
Liberty Steel said the decision to put the firm into compulsory liquidation was “irrational”.
Following the High Court decision, chief transformation officer Jeffrey Kabel told the he was “really disappointed” as he thought they had “presented a very good case”.
“We are by far the best company to run this business. We’ve run it for 10 years. Put a lot of blood, sweat and a huge amount of money into it,” he said.
In a separate statement, Mr Kabel said the move would “impose prolonged uncertainty and significant costs on UK taxpayers for settlements and related expenses, despite the availability of a commercial solution”.
Lawyers for Mr Gupta had applied for a four-week adjournment to allow time to place the company in a “pre-pack administration”, which allows an insolvent company to sell its assets to a bidder.
He wanted funding from investment giant BlackRock and Fidera, which invests in distressed companies, to buy back the business.
Winding up the company, his lawyers argued, could place the business in “free fall” and incur significant disruption, cost and risk to a nationally important steel company and its 1,500 workers.
The judge found the company was “hopelessly insolvent” with £600,000 in the bank, a monthly wage bill of £3.7m, supported by a parent group that has 15 entities in insolvency proceedings across nine jurisdictions.
PA MediaOne of the creditors, Ryan Perkins for Greensill Capital, argued UK steel-making would be better served if the company’s assets were sold off with assistance from independent special managers acting on behalf of the government after it is wound up, rather than allowing administrators appointed by Mr Gupta to conduct the process.
In a separate court hearing on Wednesday, Mr Perkins presented a letter from the Department for Business and Trade showing the government had been approached by third parties.
The court heard they had “expressed an interest in returning some or all of the sites to steel-making”, which was the “government’s desire”.
The letter added that “an orderly compulsory liquidation may be one way of ensuring steel production restarts”.
The Liberty Steel Group’s finances were upended when its main financial backer, Greensill Capital, collapsed owing billions to investors including UBS and Citibank. Those investors are part of the creditor group that applied for the winding up petition.
Mr Gupta’s plan to place SSUK in administration then immediately buy it out again would have allowed the company to largely shed those debts.
Mr Kabel said the company was still hopeful it could buy SSUK back.
“We’ve got the largest asset manager in the world Blackrock, supporting us, and several others,” he said.
“We’ll see what happens with the sales process but we’ll be there to buy it back”.