GFG Set for Crunch Talks With Unions as Pressure Mounts on Gupta
Gupta’s Empire Warned of Insolvency Without Greensill Funding
(Bloomberg) -- Executives from Sanjeev Gupta’s steel and aluminum empire will meet with U.K. unions on Tuesday, a day after it emerged it had told Greensill Capital that it too faces insolvency without the firm’s financing.
The meeting between representatives for GFG Alliance and unions comes amid fears of job losses across Gupta’s sprawling business, which employs 35,000 people in 30 countries. The impact of Greensill’s collapse has until now been unclear, but in a court filing on Monday the lender said that its largest customer by value had fallen into “severe financial difficulty.”
In a Feb. 7 letter, GFG said that if Greensill ceased to provide working capital finance, GFG would “collapse into insolvency,” according to the filing.
A spokesperson for Gupta’s network of companies declined to comment on the filing, but reiterated remarks made last week that GFG’s operations are running “as normal and our core businesses continue to benefit from strong market conditions generating robust sales and cash flows.”
Lex Greensill’s eponymous financial firm filed for administration in the U.K. following a week of high drama in which key backer Credit Suisse Group AG froze and later started to wind down $10 billion in funds that bought its products. Greensill’s collapse has cast a shadow over Gupta, who relied heavily on the firm to fund his rapid spree of acquisitions of moribund industrial assets.
Greensill stopped financing GFG at the start of March, according to its court filing. Since then, the filing alleged, GFG has “started to default on its obligations.”
Unions are now concerned about the impact on workers at Gupta’s plants. A spokesperson for steelworkers’ union Community said “Sanjeev Gupta needs to tell us exactly what the administration means for Liberty’s U.K. businesses and how he plans to protect jobs.”
Signs of stress are emerging in different parts of the Gupta empire. Wyelands Bank, a lender that’s part of GFG Alliance, was forced to return retail deposits at the direction of the Bank of England, which acted over concerns about its exposure to the rest of the group, a person familiar with the matter said last week.
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