Photographer: Brendon Thorne / Bloomberg
Photographer: Brendon Thorne / Bloomberg
Over the past decade, Sanjeev Gupta has built a reputation as one of the world’s largest steel boosters, signing a contract for mills and smelters from Romania to Australia – racing billions there the debt for moribund funds that not many others wanted.
The former commodity trader has envisioned a greener future for steel, with its vast network of companies – GFG Alliance – leading the way. But close to the collapse of its largest lender, Greensill Capital, has suddenly suspended major funding sources and is threatening that pace of expansion of bankruptcy.
Read More: Greensill had an overnight slump in production
Encouraged by concerns about the impact of Lex Greensill’s trade finance leverage, the Spanish government has asked a division of GFG Gupta to declare its release before the company is allowed to push ahead with the takeover of an aluminum plant, according to people familiar with the matter. Athene Holding Ltd., which is in talks to buy Greensill-linked assets, has banned Gupta-related assets from the contract talks, Bloomberg News reported on March 4.
A lender who is in the Gupta alliance also has pressure marks, Wyelands Bank. The Bank of England has ordered Gupta to bring in 75 million pounds into the industry to return sales investments following news of Greensill’s troubles, prompted by concerns about Wyelands’ business model and its links to other Gupta companies, according to a person who knows the case. And Greensill’s links to Gupta have emerged as the focus of a probe at the German financial regulator BaFin.
Gupta’s signs illuminate how Greensill’s fall from grace could affect the real world. Greensill companies were heavily involved in financing what they found that built the Gupta empire. Finding new finance will be crucial for its businesses, which employ 35,000 people in 30 countries. Gupta’s activity shook 5 million tons of steel in 2019 and has the capacity to produce more than 300,000 tons of aluminum annually for automotive manufacturers, packaging manufacturers, aerospace clients, and more.
A spokesman for GFG Alliance said their businesses were running as normal and the company was making progress in lining new funding.
Although Greensill built his business in an arcane area known as supply chain finance, what his company did was not very different from what most banks do: lending. But Greensill’s activity included a smartly managed area of finance working with relatively small companies that large lenders are not willing to lend to. A group of Gupta companies benefited from that.
At the end of February, Gupta was ready to close an agreement to buy Europe’s second-largest aluminum smelter, a major owned property on the north coast of Spain. Alcoa Corp. And for most of the past year, Gupta worked on what would have been a major construction acquisition ever, taking over steelwork in German operations. Thyssenkrupp AG. But Thyssenkrupp’s talks broke down last month when key stakeholders questioned Gupta’s ability to secure funding.
Gupta has had hard times before, inevitably in the cycling industries in which he operates. One clear place that could be today is rising commodity prices. As of August, steel has almost tripled and aluminum is up more than 20%, driven by a reversal in industrial demand.
However, turmoil in the Gupta empire could have a profound effect on the customers, the communities and the countries it serves. Gupta controls companies from industrial behemoths to renewable energy producers, a large hunting estate in the Scottish Highlands, and a specialist bicycle manufacturer.
France was involved in enabling the construction of Gupta 2018 of the largest aluminum smelter in Europe, in the northern city of Dunkerque, from Rio Tinto Plc. And a hydroelectric power station and aluminum smelter in Fort William, Scotland, which Gupta bought in 2016 for £ 330 million is backed by a 25-year financial commitment from the Scottish government. The government says it has a “complete security package” on the deal, but refuses to release information, citing “commercial confidentiality.”
– Supported by William Wilkes, Rodrigo Orihuela, Lucca De Paoli, Luca Casiraghi, Macarena Munoz Montijano, and Rodney Jefferson