UK's Liberty Speciality Steel could go insolvent

Market: Metals
11/11/24

The UK's Liberty Steel's Speciality Steel business is likely to go insolvent if its creditors do not approve a restructuring plan, the company said in a letter to creditors.

The company's creditors will vote on the restructuring plan in the coming months and, if accepted, the plan will be in action on about 12 February 2025.

Liberty Speciality's electric arc furnace, at Rotherham in Yorkshire, has melted less than 50,000t this year and has not operated since July, sources close to the company told Argus. The plant has capacity of more than 1mn t/yr.

In its letter to creditors, Liberty said part of its financial distress "stems in part from a change in the appetite of some of its largest customers to continue to pre-fund" and pay prices agreed in July 2023. The company has been concentrating solely on the aerospace industry, where some of its customers had been making pre-payments of up to 80pc.

Speciality Steel at present is subject to a winding up petition, filed on 8 October, by Harsco Metals Group and supported by other creditors Swallownest Engineering, Kings of Rotherham and RS Components. Harsco is owed about £4mn, according to sources close to the company.

The petition is listed for a hearing at the High Court on 20 November, and the company intends to seek the withdrawal of the petition or adjournment of the hearing pending the outcome of its restructuring plan. Some creditors have already stated their intention to support the plan, Liberty said.

Two Liberty customers have agreed, in principle, to make funding available to allow Speciality to continue trading "up to and beyond the point at which it is currently anticipated that the restructuring plan would come into effect", the company said. This would involve two upfront cash payments and "accelerated delivery premiums".

Liberty's parent company, the Gupta Family Group Alliance, has reached an agreement in principle with two prospective lenders for Speciality and is in negotiations with a third. The funding, none of which is committed at present, is subject to the restructuring plan being sanctioned.

The plan has no impact on the company's employees, Liberty said. The company has been operating its own short-time working policies at Speciality given low production levels.

By Colin Richardson

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