Metals tycoon Sanjeev Gupta has won a three-month reprieve from legal action intended to force some of his companies out of business over unpaid debts as the group’s lenders shift to a more consensual approach.
Several companies in Gupta’s GFG Alliance group, including Liberty Commodities and Speciality Steel UK, had been due in court in London next week after Citigroup applied for so-called “winding-up petitions” against them, several people familiar with the matter said.
Hearings about the petitions, at which creditors ask the court to close the companies so that their assets can be sold to repay them, have now been delayed until September, the people said.
“There are more constructive, consensual conversations going on” between Gupta’s group and its creditors, said one person familiar with the situation, although they stressed that Credit Suisse — on whose behalf Citi originally filed the petitions — could still change its mind at any time.
The delay will give Gupta, whose industrial empire is under investigation for suspected fraud, crucial breathing space to try to refinance his UK steel assets. They have been teetering on the brink after Greensill Capital, Gupta’s main lender, collapsed in a financial and political scandal in March.
Credit Suisse is pursuing Gupta for $1.2bn owed to its group of supply-chain finance funds, which packaged up debts tied to Greensill and sold them as investments to its ultra-wealthy clients.
The team at Credit Suisse seeking repayment from Gupta’s businesses has changed its approach in recent weeks, prioritising negotiations over legal proceedings, according to people involved in the discussions.
The court delay is also related to the recent announcement by the Insolvency Service extending a moratorium on winding-up petitions from next week to the end of September. That moratorium was put in place to protect companies from creditor enforcement action if they believe their business has been damaged by the Covid-19 pandemic.
Gupta earlier this month put his Stocksbridge speciality steel plant in Yorkshire up for sale. The industrialist is benefiting from a global boom in commodity prices and the reprieve could give him more time to strike deals to repay lenders and possibly avoid the court action altogether.
After months of deteriorating relations between Credit Suisse and Gupta, the two sides announced a standstill agreement this week over his Australian assets.
The bank has agreed not to take action in winding-up proceedings against Gupta’s Australian businesses for six weeks, allowing him to finalise a refinancing deal with US investors White Oak and Guggenheim. The Australian businesses account for just over $250m of the $1.2bn owed.
The standstill does not extend to Gupta’s UK assets, which are viewed as trickier to refinance.
Citi is the trustee of bond-like products sold to the Credit Suisse clients. For a winding-up petition to succeed, lenders must show that a company cannot pay what it owes.
The Swiss bank was forced to close its $10bn Greensill funds in March, trapping the savings of more than 1,000 of its prized clients, and is in the process of recouping money lent to a range of businesses via the supply chain finance group.
Separately, Gupta is due to face questions from MPs on the Business, Energy and Industrial Strategy committee in July.
The Serious Fraud Office is investigating suspected fraud, money laundering and fraudulent trading in relation to GFG. The group has denied wrongdoing and said it would co-operate with the SFO.
Credit Suisse has so far returned $4.8bn to investors in its supply-chain funds and had hoped to return up to $1bn by mid-June, but the process has been delayed by the financial regulator in Luxembourg, where the funds are domiciled.
Citi, Credit Suisse and GFG all declined to comment.