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Greensill’s troubles shine a light on the steel mogul once celebrated by royalty

At the center of the collapse of specialist finance firm Greensill Capital is Sanjeev Gupta, an Anglo-Indian steel entrepreneur who is building a new empire in an old industry.

Greensill plans to file for insolvency in the UK this week and is in talks to sell part of its business, excluding assets linked to Mr Gupta, according to people familiar with the matter. The move comes after Credit Suisse Group AG suspended more than $ 10 billion in investment funds linked to Greensill on Monday, in part, over concerns about the company’s exposure to Mr. Gupta, the Wall reported. Street Journal.

The episode shed the spotlight on the deal-hungry industrialist who was feted by British royalty and European leaders as he amassed a slew of unloved steel and manufacturing assets, in part fueled by funding. by Greensill.

Mr. Gupta’s large GFG Alliance group of companies has more than 200 manufacturing assets in 12 countries, generates annual sales of $ 20 billion and employs 35,000 people. His interests range from steel mills and a bank, to more eccentric businesses including a small Scottish bicycle maker, a tidal power project, and a company that makes parts for vintage cars.

But the 49-year-old entrepreneur remains a mystery to the wider steel market, with some companies and bankers worried about the transparency of Mr. Gupta’s activities and his financing, according to people familiar with the matter.

“They are an interesting player in the market, but when it comes to financial information it is more difficult to analyze them from the outside,” said Ingo Schachel, steel analyst at Commerzbank.

Concerns about Greensill’s exposure to Mr Gupta and GFG’s own bank emerged on Wednesday.

German regulator BaFin, which last year began examining links between the entrepreneur’s businesses and German Greensill Bank, said it had banned the lender’s activity after an audit failed. not been able to provide evidence of purchased receivables to GFG. BaFin referred cases related to Greensill Bank AG to criminal prosecutors. A Scope Ratings report in 2019 indicated that about two-thirds of the bank’s loan portfolio was tied to Mr. Gupta’s business.

Separately, GFG said it would return money to depositors at its Wyelands Bank, as part of a plan agreed with UK regulators, after injecting £ 75million, or $ 105million, into the lender. The Prudential Regulator was concerned about a range of Wyelands’ loan exposures, including to GFG, a person familiar with the matter said.

Questions about Greensill’s exposure to GFG are not new. In July 2018, Swiss asset manager GAM Holding AG froze a $ 12 billion fund after an inside whistleblower raised concerns about how the fund was valuing Greensill’s assets. These included hundreds of millions of dollars in illiquid assets linked to Mr. Gupta’s businesses.

Mr. Gupta declined to comment through a spokesperson.

A spokesperson for GFG declined to comment on Greensill, but said GFG currently has sufficient funds, with plans to bring in new capital.

“We are enjoying a recovery in the steel and aluminum markets, which means most of our businesses are operating near full capacity,” he said.

Steel prices in Europe are trading at 13-year highs, almost doubling since last June, as demand rebounds after being hit by the pandemic, according to S&P Platts. The prices of iron ore and aluminum, which GFG also sells, are also healthy.

Mr Gupta’s ties to Greensill – he had a close and long-term business relationship with its founder and was briefly a shareholder in the finance company – also hampered the entrepreneur.

The fact that Mr. Gupta was too dependent on funding from Greensill was a factor behind the Thyssenkrupp industry group AG

decision to end negotiations to sell it its steel business in January, according to a person close to the deal. GFG said at the time that the deal collapsed on price.

Some have criticized the lack of transparency of GFG’s accounts. For example, neither GFG nor its Liberty Steel branch disclosed consolidated accounts to ArcelorMittal HER

during negotiations on the sale of several European steel plants in 2019, according to a person familiar with the matter.

A spokesperson for ArcelorMittal said Liberty Steel made all of its payments for the assets on time, but declined to comment further.

A metallurgist works in a blast furnace operated by Liberty Steel.


Photo:

martin divisek / Shutterstock

The GFG spokesperson said Liberty Steel plans to release consolidated accounts this year to improve transparency.

The company separately prepares combined accounts for all of GFG’s activities and sets up a board of directors composed of independent directors to attract investors to the public markets and enable it to diversify its sources of funding.

Mr Gupta is a director of more than 80 companies, according to Companies House, a UK business register, which underlines the complexity of his transactions.

Mr. Gupta was born in the Punjab, in northern India, into a family of industrialists. In 1992, while studying economics at Cambridge University, he established a commodities trading company in Africa and Asia, which by 2000 had grown into a metals trader.

It rose to prominence in 2013 when Liberty bought a steel plant in South Wales, where a century-old industry had been brought down by cheaper competition from the developing world. This established a model the company would use to buy unloved assets at low prices, often with government backing, and by 2018 the company had moved to the United States with two steel acquisitions.

The steel buying frenzy continued, with GFG agreeing last month to buy a bankrupt steel plant in India for $ 60 million.

Mr Gupta’s desire to buy ailing business has seen him applaud in Britain and elsewhere, where industries like steel have declined in recent decades amid cheaper products from emerging economies like China, Vietnam and Turkey.

Prince Charles, the next to take the British throne, told reporters in 2018 that Mr Gupta applied “real imagination, innovative thinking and lasting rejuvenation to our country’s heavy industries” at an event aimed at developing manufacturing skills.

Photos displayed in a Liberty Steel building in central London show him mingling with royalty and politicians. The company’s headquarters are adjacent to Buckingham Palace, the British royal family’s own home base. But people who know Mr. Gupta say he’s too busy at work to socialize with high society, always with a phone in his ear.

Write to Alistair MacDonald at alistair.macdonald@wsj.com

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