Parts of Liberty Steel are “disputed”, says CFO
Liberty Steel’s UK chief financial officer admitted some of the group’s larger companies are “contested,” but insisted that some of the smaller areas are profitable.
Anton Krull, chief financial officer of Liberty Steel UK, said parts of the business are facing tough times.
The company has faced questions about its future following the collapse of Greensill Capital, a major lender to the GFG Alliance, of which Liberty is a part. GFG is currently trying to refinance part of the loans it has received.
“I would say that the big companies are probably being challenged and some of the small companies are operating reasonably profitably,” Krull told MPs on the Trade, Energy and Industrial Strategy Committee.
However, Mr Krull and Jon Bolton, a board member of the GFG Global Advisory Board, said the issues Liberty faces are similar to those facing the industry as a whole.
Covid-19 has also led to challenges for steel.
Led by Sanjeev Gupta, GFG Alliance has come to the rescue of cash-strapped steel mills across the UK over the past decade.
But how Mr. Gupta did it has come under scrutiny. In 2019, the businessman said he used alternative sources of capital, including supply chain finance, to restart cash-strapped steel plants.
Instead of sending an invoice directly to their customers and waiting weeks to get paid, the GFG companies could send them to Greensill Capital, which settled the invoice immediately.
When the customer finally paid his bill, Greensill was then refunded and collected a small fee.
But when Greensill collapsed in March, he had around five billion dollars (£ 3.6 billion) of exposure to GFG.
The content of some of the invoices that the GFG companies borrowed from Greensill also raised questions.
The Financial Times revealed that some companies listed on invoices used to borrow from Greensill said they never did business with GFG.
Mr Gupta said the loan was made on a “future receivables” basis, where Greensill had identified clients with whom GFG “could potentially do business in the future.”
The Serious Fraud Office has since opened an investigation into GFG and its funding arrangements with Greensill. The SFO did not say whether its investigation focused on future receivables or some other part of the business relationship.
During his testimony, Mr Krull – who joined the company in April – was forced to say that he was in fact the CFO, although he did not know the answers to many questions from MPs.
In an awkward exchange interspersed with pauses, the businessman said he “felt uncomfortable”.
During the hearing, it emerged that neither he nor Mr Bolton believed they were in the best position to talk about GFG’s finances, although MPs said that was what they had requested.
Mr Bolton said he was “at no time” aware that he was offered to comment on the financial aspects of the business, while Mr Krull said he was “surprised that ask me to attend “.
Mr Krull also said he did not deal with a small company called King & King, which audited many GFG Alliance companies.
“I haven’t met King & King, I haven’t dealt with them,” Mr. Krull said, saying others at GFG deal with listeners.
When asked if, before joining Liberty Steel, he thought King & King might not have the capacity to audit a billion dollar company, Mr. Krull said replied, “It occurred to me.”
He added: “I think my personal opinion is that it is essential that there is a consolidated view of Liberty Steel UK that is presented, clear and credible, and certainly, I think it is still appropriate that the rotation of audit firms occurs. “