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Liberty Steel to 'fix or sell' underperformers in post-Greensill restructuring

Highlights

Liberty appoints team to restructure business

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London — Liberty Steel, part of industrial group GFG Alliance, said May 5 it will "fix or sell underperforming units" in a restructuring and refinancing drive as it recovers from the March collapse of Greensill Capital, its biggest financier.

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Liberty Steel has appointed four new directors to its board to form a Restructuring & Transformation Committee (RTC) , it said in a statement. The RTC will have "full autonomy to restructure Liberty's operations to focus on core profitable units, and either fix or sell underperforming units," in a move to "lead and accelerate the restructuring and refinancing of Liberty in order to protect and maximize creditor and stakeholder value," the company said.

The aim is to continue to improve the commercial and operational performance of those units which are profitable, a spokesperson said in an emailed statement.

The spokesperson declined to comment however, on the timetable for the new committee to take actions.

Liberty added that refinancing of its Greensill exposure has been agreed May 5 for Liberty's Primary Steel and Mining Australia units, including the Whyalla works.

Ostrava, Galati 'profitable'

Liberty Steel, with some 20 million mt/year of product rolling capacity worldwide, of which some 10 million mt/year is in Europe, did not specify which of its units are underperforming. The company has more than 200 manufacturing locations globally across 10 countries, employing more than 30,000 people, with furnaces, rolling mills, service centers and distribution sites across the UK, continental Europe, Australia, the US and China, serving sectors including construction, energy, aerospace, automotive and infrastructure.

Sources close to Liberty said "it has been made very clear that the company's major businesses -- Liberty Whyalla [in Australia] and Liberty Galati and Liberty Ostrava in Europe -- are performing strongly but that some businesses -- such as some parts of Liberty Steel UK -- have suffered due to significant market and COVID-19-related issues," including a slump in orders from the aerospace industry.

Still, GFG Alliance executive chairman Sanjeev Gupta has said on various occasions he is committed to see the group's UK steel businesses remain in operation.

Liberty Steel has grown rapidly in recent years to become Europe's fourth-largest steelmaker with 6 million mt/year of crude steel capacity in the region, after it acquired works including Ostrava and Galati from major steelmaker ArcelorMittal.

Gupta had said in March that Ostrava in the Czech Republic and Galati in Romania, had been operating profitably following successful turnaround efforts. This is seen partly due to a surge in steel products demand and prices -- some of which are now at their highest ever -- fueled by government-backed stimulus as economies recover from the COVID-19 pandemic.

Gupta also said in March that the Whyalla works was operating profitably for the first time in many years.

Restructuring experience

The RTC will comprise US-based Jeffrey S. Stein with restructuring experience in oil, energy and coal companies, who joins Liberty as chief restructuring officer; UK-based Jeff Kabel, who is chairman emeritus of the International Steel Trade Association (ISTA), who joins as chief transformation officer; Dubai-based former banker Iain Hunter, who joins as chief governance officer; and Dubai-based Deepak Sogani, formerly with India's Jindal Power & Steel and Essar Steel, who joins Liberty as its new chief financial officer and interim CFO for GFG Alliance.

Sogani is replacing V Ashok, who has decided to step down at the end of May for personal reasons.

Liberty Steel said the RTC will support stakeholder engagement and work with the Liberty board and its advisor panel, comprising PJT, Alvarez & Marsal, and Norton Rose Fulbright, to negotiate an amicable solution with Greensill's administrators and other stakeholders.

"This restructuring combined with the continuing strength in steel and iron ore markets will present a solid basis for the future of Liberty," it said.

S&P Global Platts' 62%-Fe IODEX CFR China iron ore price touched its highest-ever level April 27 at $193.85/dmt as demand boomed from steelworks including in China amid supply-side tightness.