Sanjeev Gupta’s GFG Alliance has failed in an attempt to have a winding-up order thrown out on the grounds that the metals group’s struggles were caused by the coronavirus pandemic.
Credit Suisse, one of Gupta’s main creditors, started insolvency hearings against GFG companies last month, in a move that raised concerns for the jobs of 35,000 workers in the UK and in operations around the world. US bank Citibank has brought the claim on behalf of Credit Suisse, its client.
Gupta’s companies have been trying to find a new source of funding for more than a year since the collapse in March 2021 of Greensill Capital, an investment firm that previously employed former UK prime minister David Cameron. Greensill had funnelled $5bn (£4bn) to GFG, which is now the subject of an investigation by the UK’s Serious Fraud Office (SFO). GFG was obliged to hand over documents to SFO investigators in April.
Credit Suisse was one of the main backers of Greensill, who promised attractive investment returns, and it has been left to try to reclaim its money in negotiations with GFG and via the courts.
Negotiations are still ongoing between GFG and Credit Suisse, but the latest ruling will mean that the threat of a winding up order will remain. Citi will now be able to advertise to other GFG creditors asking if they also would like to seek a winding up order.
Gupta had argued in a witness statement that there was “a significant adverse financial effect on each of the companies” caused by the pandemic because of a slump in demand for steel in the automotive and aerospace industries, according to Global Trade Review, which first reported the ruling. However, Judge Nicholas Briggs in London said the case can proceed.
A GFG Alliance spokesperson said: “This judgment on Covid protection qualification does not mean that the UK companies in question will be wound up. Any further hearing would likely be in autumn or winter this year at which the merits of the winding up proceedings will be heard in their own right.
“We will defend our position vigorously and we have evidenced our commitment to our UK businesses with injections of shareholder capital since October 2021.”
Credit Suisse declined to comment.