Europe's largest steelmaker has filed a suit against Liberty Steel East Europe in the English High Court, petitioning for administration over non-payment of €140mn in deferred compensation for assets it acquired in 2019.
ArcelorMittal sold several assets to Liberty in 2019 — including the Ostrava plant in the Czech Republic, Galati in Romania, Skopje in Macedonia, Piombino in Italy and Dudelange-Liege in Luxembourg and Belgium — to ensure it got merger control approval for the lease of Italian steelmaker Ilva.
As part of that deal Liberty agreed to pay €140mn in deferred compensation and to provide audited, consolidated financial statements to ArcelorMittal showing its consolidated assets amounted to at least €150mn until its obligations were satisfied. ArcelorMittal said it has never received that money, and in November last year obtained a freezing order against Liberty in Singapore, preventing it from transferring any assets outside the country, as it sought repayment. Liberty still does not publish consolidated accounts, and Companies House has taken legal action against Liberty directors, including Sanjeev Gupta, over 76 entities that have not filed.
Earlier this year the English High Court recognised an earlier arbitration award and enforced it, meaning ArcelorMittal can "attach and execute … assets located in the United Kingdom in satisfaction of the award".
On 7 October ArcelorMittal applied for the administration of Liberty Steel East Europe (Holdco), through its lawyers King & Spalding International. The company refused to comment.
"This is a long-running commercial dispute relating to contested deferred consideration from 2019 which GFG is challenging through legal means. The dispute refers to claims arising from a sales and purchase agreement which is itself being litigated in confidential arbitration", a Liberty spokesperson said.
Liberty has been struggling with the downturn in the steel market of late, with many of its assets, including those acquired from ArcelorMittal, not operational, or running substantially below capacity. Its Ostrava business is in administration, while its Galati works still has no furnaces operational; the company said in July it would restart a furnace "on the back of healthy demand" but has not done so yet. It said earlier this year it would look to sell the rolling lines acquired from ArcelorMittal.
Liberty has mothballed some of its UK businesses, namely its plate mills in Scotland and merchant bar business in Scunthorpe, with the latter not operational for the last few years.
The power supplier to its Hungarian steelworks, ISD Power, has also petitioned for insolvency of Duna Rolling, after the rolling mill failed to keep up with energy payments. Duna Furnace was also petitioned for insolvency by scrap supplier Keramet, over non-payment. A new law was passed on 4 October which states if wages of employees at both units are not paid by today, Duna Furnace and Rolling can be liquidated.
