A steel factory in Scotland owned by Sanjeev Gupta, the tycoon fighting to save his metals empire, stopped making interest payments on an overdue taxpayer-backed loan last year after the coronavirus crisis hit the UK.
The Dalzell plate mill run by Liberty Steel near Motherwell was reopened in 2016 and the devolved Holyrood administration later provided a £7m three-year commercial debt facility.
It was one of the first acquisitions on which Gupta built his GFG Alliance, a sprawling industrial conglomerate with $20bn in revenue. GFG is now teetering on the brink after the collapse of its main lender, Greensill Capital, last month.
The agency responsible for the public funding to Dalzell, Scottish Enterprise, said interest payments and loan conditions known as covenants “were met until the impact of the current Covid pandemic”.
Gupta has said he is trying to secure alternative long-term financing for his wider group.
But a request for a £170m bailout of Liberty Steel, the UK’s third-largest producer of the alloy with 3,000 employees, to help with working capital was recently rejected by the Westminster government, which is concerned about a lack of financial transparency.
The revelation of the missed interest payments will heighten pressure on the Scottish government, which has already faced questions over its decision to provide a £575m guarantee to GFG for the purchase of an aluminium smelter in Lochaber and two adjoining hydropower plants.
Murdo Fraser, Scottish Conservative finance spokesman, said “the murkiness of the SNP’s dealings with GFG just got darker”.
He called for “full disclosure” of “all the financial liabilities” due to the SNP government from GFG.
“Where public funds are at risk, the taxpayer has a right to know how much could be lost,” he added.
Scottish Enterprise said: “We recognise the challenging environment for businesses in Scotland right now and also the significant economic benefit Liberty Steel brings in terms of jobs, the supply chain and the future safeguarding of Scotland’s steel industry.”
The agency said it was working “to explore avenues of support for the business”, but declined to disclose details on when compliance with interest and covenants ended or when the debt originally fell due.
“We are in discussion with Liberty Steel on repayment of the loan funding. Debt forbearance is not uncommon in the current market.”
Liberty Steel, which declined to comment on its arrangements with the Scottish government, said: “We can confirm that Dalzell has been operationally strong this year and we are up to date with our vendor payments.”
Gupta is scrambling to refinance the debts of his GFG Alliance which includes billions of dollars owed to Greensill.
The specialist finance provider’s implosion has led to a political lobbying scandal in the UK involving former prime minister David Cameron, a paid adviser to Greensill who pressed government officials to include it in a taxpayer-backed coronavirus loan scheme.
Along with the nearby Clydebridge plant, the Dalzell facility is one of Scotland’s last two major steelworks, which together employ 138 people. They were bought by Liberty for a nominal sum in a deal brokered by the Scottish administration, after being mothballed by previous owner Tata.
The Dalzell unit’s accounts are overdue, according to Companies House. Its most recent financial statements, for the year ended March 2019, show the business swung into a pre-tax profit of £610,00 on revenue of £41.8m.