The UK's third largest steel maker, Liberty Steel will pause some production at its UK plant next week as employees get ready to be furloughed for up to a month as it seeks a funding deal to save the business.
On Friday evening, around 180 workers at the steel maker's plant in Rotherham, South Yorkshire, were put on furlough under the government’s COVID-19 support scheme. While some of the 660 staff at the site have been told they may not be able to return to work until 14 April.
Liberty’s owner, Sanjeev Gupta told the bosses of firms at his steel empire to keep cash in the business and “reduce their call on group resources” as he attempts to agree a deal over debts owed to collapsed lender Greensill Capital.
Gupta is trying to reach a deal with the administrators to Greensill, which was its main source of funding, he said on Friday that he had received various offers to refinance.
Gupta's GFG alliance, which employs 35,000 people globally, was put under pressure after Greensill entered administration last week. Liberty Steel, a subsidiary of GFG, owns nine steel sites across the UK.
The steel boss said in an email to GFG's workforce that discussions were underway on an agreement that would give the company he chairs breathing space, the Telegraph reports.
"We are having constructive discussions with Greensill’s administrators. We hope to update you soon on our progress in negotiating a formal standstill agreement that will put on hold arrangements between the two parties and allow both sides to assess and negotiate next steps," Gupta wrote.
Greensill underwrote the expansion of GFG Alliance and its Liberty Steel subsidiary to the tune of several billion pounds. It also funded the firm through supply chain financing, advancing funds against future customer invoices issued by GFG.
Business secretary Kwasi Kwarteng held talks with trade unions on Friday night, and he said that he is continuing "to monitor developments very closely and work to build a strong, sustainable steel sector in the UK."
Unions representing the steel workers want the UK government to give assurances that it will step in to save production if a funding deal isn't reached. France’s finance minister, Bruno Le Maire, announced that the French government would step in to protect jobs at GFG’s French sites.
The UK government could be forced to take on the loans following Greensill's demise, which could leave UK taxpayers exposed to £1bn ($1.4bn) of debt, because of three government guarantees.
The London-based finance group, which filed for insolvency on Monday, advanced hundreds of millions of pounds to firms linked to Gupta's using a state-backed coronavirus lending scheme, the Financial Times said.
Greensill, which specialises in supply-chain finance, was founded by Lex Greensill, who received the CBE for services to the economy in 2017.
The news of the collapse could have a devastating effect on the steel industry in the UK, with as many as 5,000 jobs at risk.
WATCH: Collapse of finance company Greensill Capital leaves thousands of steel jobs in the balance