Raising several eyebrows towards him, British industrialist Sanjeev Gupta's privately owned GFG Alliance has signed a deal to acquire US-based steel wire producer Keystone Consolidated Industries (KSI) for $320 million. Some investors have questioned the extent of Gupta's funds and his cashflow. The GFG Alliance, with assets spans industrials group Liberty House and energy assets across the world. The group bought steel plants in the Czech Republic, Romania, Macedonia, and Italy from top global steelmaker ArcelorMittal (MT.AS) in a deal that doubled its worldwide steel-rolling capacity to 15 million tonnes. GFG also owns a US-based steelworks in Georgetown.
It has said its accounts show core earnings of $500 million in 2017, versus $165 million a year earlier. IT also said, the KCI deal, which will take its total US steel-making capacity to 1.8 million tonnes, is financed by an asset-backed loan from two North American banks and a term loan from BlackRock Financial Management Inc.
Meanwhile, the group faces difficulties in Australia, as QBE, the country's biggest insurers is slashing the level of trade credit insurance cover it provides to some suppliers of GFG's Australian steel operation following concerns about a lack of financial transparency. Gupta's international metals, manufacturing and energy conglomerate rescued Arrium, a collapsed steel and mining business, last year in a $700 million deal. In mid-November, QBE wrote to suppliers of Arrium, since renamed Liberty OneSteel, warning that insurance cover was dependent on Gupta's business providing full financial information on the wider GFG group and parent company.
QBE told suppliers it had repeatedly requested information on the wider GFG group, warning that if the information was not forthcoming it would withdraw cover on November 30. The insurance group has now told some suppliers that while it had met Gupta's team and GFG had provided additional information as requested, its Global Credit Committee has decided it is unable to continue providing full support beyond the November 30 deadline. A source in the know said the Australian giant was reducing cover but was in talks with its key customers “to find a solution without completely withdrawing” unilaterally. Another person said cover was being suspended for two weeks for smaller suppliers, but that it was intact for major suppliers.
A Liberty House spokesperson said, “Our team in Australia has been in touch with QBE there and we have been assured that cover has not been withdrawn. We held one of our regular briefings for all the top underwriters in London and received very positive feedback from them.” They added, “People asked questions and got answers. Nobody left with any negative connotations.”
