News, Culture & Society

ALEX BRUMMER: Gupta’s flawed route to Liberty

ALEX BRUMMER: Gupta will raise a few eyebrows with his choice for Liberty’s restructuring team

No one can accuse Liberty Steel boss Sanjeev Gupta of giving up the ghost. Faced with the collapse of his main lender Greensill and a refusal by Business Secretary Kwasi Kwarteng to provide £170million of rescue loans, he is hanging on by his fingertips.

In the latest moves to shore up his global empire, GFG Alliance, he is reported to have found funding for his Australian operations and has brought in experts to see what can be salvaged in terms of steel making in the UK.

The rescue team may be assisted by surging steel prices across the world as Covid retreats, demand surges and production bottlenecks develop.

Break-up: Liberty Steel’s rescue team may be assisted by surging steel prices across the world as Covid retreats, demand surges and production bottlenecks develop

At first glance, Gupta’s four-person restructuring team looks credible with US-turnaround specialist Jeff Stein and a former JP Morgan banker Jeff Kabel involved. 

The choice, however, of Gupta empire veteran Dubai-based Iain Hunter as chief governance office looks barmy.

The last we saw of Hunter was as chief executive of Gupta-controlled Wyelands Bank, which is being wound down by the Bank of England. 

That doesn’t happen unless there are serious problems. We do not precisely know what is wrong because the Prudential Regulation Authority, the Bank’s enforcement arm, is not telling.

Down Under, Gupta has found a rescuer, at the last ditch, for the Whyalla steelworks in the shape of California-based White Oak Global Advisors. The specialist lender is reported to have stepped in as Credit Suisse, a major creditor, was on the cusp of winding up the business.

With the implosion at Greensill, the Gupta companies looked to be a house of cards about to collapse. When all other options had been exhausted it has been expected that the Government would come to the aid of what is considered a strategic asset.

It may just be that the after-Covid demand and an infrastructure boom offer a lifeline for low carbon, speciality steel.

But it might have been better if Hunter was not attached.

Debt collectors

For the last 140 years, Bradford-based Provident Financial has provided short-term credit to low-income families in the North and across the whole country.

Its doorstep lending is disparaged for its usurious annual percentage rate of 535 per cent, which is hard to defend.

But for all its faults, it serves a particular need and is used by hard pressed households to get through a crisis.

When the Provvy unveils its results next week, it is expected to say it has pulled out of doorstep lending. 

The reasons for doing so are the Financial Conduct Authority’s intrusive regulation and the capture of clients by claims management firms.

They have had great success in convincing the Financial Ombudsman that compensation is due for past lending practices. 

To help meet the claims, Provident is spending £15million on a handling service and has set aside £50million to cover the claims.

It now wants out and in future will concentrate on credit via the Vanquis card offshoot which issues cards to people who lack an established financial record. 

The charge on Vanquis is 39.9 per cent, but for weaker customers it has been as high as 69.9 per cent.

The difficulty for customers using Provident doorstep lending is that the sums borrowed tend to be small, and repayment is negotiated with the agent or digital lender. Many borrowers are not regarded as a good enough credit risks to qualify for Vanquis.

The poorest in society pay most for loans because the risks to the lender are greatest. Remove regulated non-standard lenders and the next step down is thugs who collect debts armed with baseball bats and worse.

Regulators have to be careful about what they wish for.

Safety warning

The Sky Q box provides a terrific entertainment service. Its launch of a Peloton app, to offer ‘first-class fitness experience in your home’ could have been better timed.

In a U-turn Peloton chief executive John Foley revealed that the fitness sharpshooters were recalling its Tread and Tread+ treadmills after a child death.

This followed earlier reports to US consumer regulators of dozens of children being sucked underneath the machines. The previous response was to tell buyers to check the safety manual.

That is not the sensible reaction of a company putting clients first.

Read more at DailyMail.co.uk