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Sanjeev Gupta is seeking a £200m lifeline that will allow his UK steelmaking operations to get back to full production.
Liberty Steel is thrashing out details of a new working capital facility with US-based White Oak Global Advisors, a company specialising in funding struggling businesses.
An agreement is subject to due diligence checks by White Oak and guarantees that the money would be ring-fenced for Liberty’s UK operations and not funnelled into parent company GFG.
Sources told The Telegraph that negotiations about the financing are at a “detailed” stage. If an agreement is secured, which one person with knowledge of the plan said was not certain, funds could arrive within weeks.
Liberty - part of Mr Gupta’s GFG empire - has been battling to survive since Greensill Capital collapsed into administration in March. Greensill was its main source of funding, underwriting billions in controversial invoice financing for it and its subsidiaries.
Liberty has about 3,000 UK staff and its speciality steel businesses based in Rotherham and Stocksbridge have been hard hit by lower demand resulting from the pandemic.
Production was temporarily halted as the crisis deepened and is now running at reduced rates.
Landing the funding - expected to be in place for at least a year - would make Liberty a more “investeable” prospect, said one source. That would boost the chances of securing longer-term financing that would safeguard the business.
Credit Suisse, a major investor in Greensill, has filed legal actions pushing for several Liberty and GFG businesses to be wound up in an attempt to recoup its investments.
Any fresh funding from White Oak would be subject to approval from creditors such as Credit Suisse, which has a claim on Liberty.
A working capital injection is understood to be seen by Mr Gupta as the best chance of Liberty’s UK steel plants surviving the downturn and current cash crisis, and therefore Credit Suisse’s best chance of recovering its money.
In March Kwasi Kwarteng, the Business Secretary, refused a request by Liberty for a £170m state-backed bailout, with the minister concerned about what he later described as the GFG’s “opaque” structure and fears taxpayer funds could end up in Mr Gupta’s overseas, rather than British businesses.
The latest development comes days after Mr Gupta struck a deal for fresh funding from White Oak for Liberty’s operations in Australia, on the eve of a court case to wind up the business in Whyalla, South Australia.
Liberty and White Oak declined to comment.