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15th May 2022

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Sanjeev Gupta

Sanjeev Gupta’s metals group has struggled for more than a year to afford payments to Tata Steel tied to a £100m acquisition it made from Britain’s largest steelmaker, according to court documents.

Gupta’s Liberty Speciality Steels, which bought Tata’s speciality steel business in 2017, has been asking for “forbearance” to meet the cost of the deal, according to a lawsuit filed by Tata in London’s High Court.

Gupta’s company only paid £6.2m in cash upfront for the Tata business, the 2018 accounts for Liberty Speciality Steels showed, with further sums due in “deferred” cash payments and additional financing via preference shares, an instrument considered halfway between debt and traditional equity. 

Gupta’s group defaulted on a £12.5m deferred payment due in May 2020 and instead offered incremental £1m and £1.5m payments towards the purchase, the court documents revealed.

The filings offer a glimpse into the frantic attempts by several executives to reassure Tata that payments would be made during a turbulent 12 months spanning the outbreak of the pandemic and the collapse of Gupta’s main lender, Greensill Capital.

V Ashok, the chief financial officer of GFG Alliance, a loose collection of Gupta-family owned businesses, emailed Kaushik De, finance director at Tata Steel Europe, twice in August 2020 offering smaller payments and asking for “support and understanding”, according to the lawsuit. 

The details of the correspondence emerged in the claim by Tata, which is suing three of Gupta’s companies — Liberty Specialty Steels, Liberty House Group and Speciality Steel UK — over the partial payment of the £12.5m due as part of the purchase of its UK speciality steel business four years ago. 

Liberty made three separate £1m payments in July 2020, and two further payments of £1.5m each in September and October that year towards the £12.5m, Tata said in its court filing. Tata is suing for £7.9m, which includes the remainder plus interest and £1.3m for insurance liabilities. 

In the suit, dated April 19 but only made public on Wednesday, Tata said a fourth instalment of £10m was due by May this year and would be added to the lawsuit, with interest, if it were not paid.

Tata acknowledged the particulars of its claim but said it would “not be making any further comment on them”. GFG declined to comment on the suit.

The court case adds to the pressure on Gupta’s empire which has been rocked by the failure of Greensill. Gupta was dubbed the “saviour of steel” for purchasing unwanted assets from established industry players, including Tata and ArcelorMittal.

Email excerpts in Tata’s filings show how Gupta’s companies first cited the coronavirus pandemic, then Greensill’s implosion, as reasons for its difficulties. 

Sanjeev Gupta, dubbed the ‘saviour of steel’ © Stefan Wermuth/Reuters

In May 2020, Peter Hogg, Liberty’s development director, wrote to Tata saying the pandemic had led to an “unprecedented reduction in demand” and that it was working with the UK government on a solution, according to the filings. It had built the payment “into our forecasts and into our discussions with [the government],” he said. 

Liberty intended to “settle all outstanding” payments as soon as funding had been “realised”, Ashok said in an email to De on August 18. Ten days later he reiterated the point, saying in another email, “we aim to settle all outstanding amounts” as soon as funding was “drawn”.

“We would also request your kind consent to waive off all interest claims on the outstanding amounts,” he added, after Tata began adding interest charges to the unpaid bill. 

On March 14 2021, with sums still owed, Taral Desai, chief financial officer at Liberty Industries Group, emailed De saying the company was “going through a crisis arising out of the insolvency of its principal lender, Greensill Capital”.

“We shall revert with timelines to clear the liability as soon as we have visibility of the situation getting back to normalcy and would request you to bear with us till then,” he wrote.

GFG Alliance on Wednesday said it had agreed terms to refinance its Australian steel plant and associated mines. 

2021-05-06 04:00:13

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By admin