The UK government rejected a request from Sanjeev Gupta's GFG Alliance for a 170 million-pound ($234 million) bailout as it struggles to stay afloat following the collapse of its biggest lender.
The plea was rebuffed amid concerns by ministers over the structure and corporate governance at GFG, and whether bailout funds would remain in the country, a person familiar with the matter said. The request came on Friday.
Without the funding boost, thousands of jobs may be at risk in Gupta's U.K. operations. He owns a dozen steel mills in the U.K. under his Liberty Steel division, and an aluminum smelter in Scotland. In all, GFG has some 5,500 employees across the country, with 3,000 of them at Liberty's operations.
Ministers are "closely monitoring developments around Liberty Steel and continues to engage closely with the company, the broader U.K. steel industry and trade unions," the government said in an emailed statement. "Our unprecedented package of Covid support is still available to the sector to protect jobs and ensure that producers have the right support during this challenging time."
The future of Gupta's businesses has been cast into doubt after the collapse of Greensill Capital, which provided $5 billion of credit facilities to GFG. Gupta is seeking to negotiate a payment standstill agreement with the lender and restructure its finances.
GFG said in a statement Monday that most of its businesses globally "are performing well and generating positive cash flow," and that it's taking "prudent steps" to manage its resources.
In the U.K., Liberty is "working on solutions to provide additional working capital facilities to replace the funding gap left by Greensill," GFG said in the statement. "Liberty Steel U.K. continues in constructive discussions with the U.K. government on measures to supplement these efforts and to highlight the importance of this business to the U.K.'s industrial supply chains."
Some of Gupta's plants provide products that cannot be sourced elsewhere in Britain, raising the stakes for local manufacturers who depend on them.
Officials have suggested that the government would step in in the event of insolvency, and on Thursday, Business Secretary Kwasi Kwarteng said that the government was looking to keep the mills open.
"We are doing all we can to look at all options to make sure that this vital piece of infrastructure continues and remains a going concern," Kwarteng told members of Parliament. "The company has a range of assets spread across England and Wales, in particular, and we are looking very closely at what specific assets and jobs are necessary. We hope to support the company in its entirety."
GFG said parts of Liberty Steel in the U.K. have suffered because of a 60% drop in demand for some aerospace products during the Covid-19 pandemic. Electricity prices 2/3 higher than in mainland Europe create a "poor operating environment," it said.