Worries have been raised over the future of thousands of steel workers, after Liberty Steel’s lender filed for administration.
Lawyers for Greensill Capital, which counts David Cameron among its advisers, appeared in court on Monday to appoint administrators from Grant Thornton.
The lender has “fallen into severe financial distress,” according to its lawyers and had no way of repaying a 140 US dollar (£101 million) loan to Credit Suisse, the Financial Times reported.
Greensill lends money to businesses so they can pay their suppliers. One of its major customers is Sanjeev Gupta’s GFG Alliance, which owns Liberty Steel.
The lender is expected to be in part bought in a pre-pack deal by Apollo Global Management, with news due within the next couple of days.
However the Apollo deal will not include Greensill’s exposure to GFG Alliance.
Mr Gupta’s business empire employs around 5,000 people in the UK, a majority of whom work for Liberty Steel.
Often labelled the “saviour of steel”, the businessman has snapped up a series of production sites across the UK which had been under pressure from cheap overseas competition.
However GFG has itself faced pressure, and has relied on Greensill for around five billion dollars (£3.6 billion) worth of funding used to pay its suppliers.
A spokesperson for GFG Alliance said: “Our operations are running as normal and our core businesses continue to benefit from strong market conditions generating robust sales and cash flows.
“Our operational efficiency programme has improved profitability and we are making progress in our discussions with financial institutions that can help diversify our funding. We are keeping our employees up to date and will provide further updates as we deliver our plans.”
Labour shadow minister for business and consumer Lucy Powell said: “This is a deeply concerning situation, and a very worrying time for Liberty Steel workers.”
She added: “It’s vital that the Government acts with the urgency required and doesn’t wash their hands of the situation.
“As we’ve argued through the pandemic, the Government should do more to support British steel and the UK manufacturers who are their customers.
“Instead they have been ignored, without even one reference in the Budget, threatening jobs and weakening the foundations of our economy.”
A spokesperson for trade union Community said: “Sanjeev Gupta needs to tell us exactly what the administration means for Liberty’s UK businesses and how he plans to protect jobs.
“The future of Liberty’s strategic steel assets must be secured and we are ready to work with all stakeholders to find a solution.”