Daily Management Review

British Steel goes bankrupt


05/23/2019


One of the largest British steel companies, British Steel, went bankrupt after the British government refused to give it a loan of tens of millions of pounds. The authorities announced start of liquidation of the company established three years ago in order to save several factories and tens of thousands of jobs.



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The High Court of London decided on "forced liquidation" of the British steel company British Steel, the British Insolvency Service announced. A representative of the service was appointed to liquidate British Steel, and several EY employees will assist him. The bankruptcy of British Steel was questionable until the last moment. In order to avoid bankruptcy, the company needed to get a loan from the government - at first it was about £ 75 million ($ 95 million), then the amount was reduced to £ 30 million ($ 38 million). If the government had agreed to provide a loan, the owner of British Steel, the investment company Greybull Capital, and the banks would have agreed to provide financing to the company.

The government itself explained the refusal to provide a new loan by saying that British Steel and its lenders insisted on “non-commercial terms” of the loan, which is contrary to EU law.
Just a month ago, the government provided a loan to British Steel in the amount of £ 120 million ($ 152 million). These funds were supposed to bring activities of its plants in line with the new European regulations on emissions to the atmosphere. Laborites demanded that the government nationalize British Steel, and the Finance Ministry responded that nationalization of the company would make sense only if there was a prospect soon after that to sell it again to another investor. At the same time, according to The Guardian, citing sources, the authorities will continue to search for a buyer for the company's assets.

British Steel, the second-largest British steel producer, was created in 2016 after the separation of a part of British assets of Indian Tata Steel and its purchase by Greybull Capital investment fund for £ 1. Then Tata Steel announced its intention to leave the UK steel market due to the loss-making enterprises amid the global crisis of this industry. Since it would deprive 15 thousand people of jobs, the UK government then found a buyer for these assets. But after that, British Steel didn’t get any better; besides, Brexit’s expectations, the pound sterling depreciation and the US-China trade war have had a negative impact on its activities.

The company’s bankruptcy threatens 5 thousand jobs in British Steel itself, as well as 20 thousand jobs in companies connected with its supply chain.

The company's largest plant, which is over 100 years old, is located in the town of Scunthorpe in Lincolnshire. This plant, which annually produces about 2.8 million tons of steel, is among other things the largest supplier of the British railway company Network Rail.

source: bbc.com






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