UK's Island Steel unsecured creditors to be wiped out

Unsecured creditors of Newport-based decoiler Island Steel will likely be wiped out in the company's pre-pack administration, according to the administrator's proposal.

Unsecured creditors are owed just over £5mn ($6.3mn). Trade creditors include South Korea's Samsung C&T, which is owed just over £1mn, and the UK divisions of Germany's ThyssenKrupp Materials Trading and ThyssenKrupp Materials, which are owed around £861,000 and £670,000, respectively.

Island Steel was purchased for £1.46mn in a pre-packaged administrator by Silver Birch Steel, which is owned by Island Steel managing director Alexander Roberts. The purchase includes all the stock at the site at a valuation of 27.5p in the pound, which was below its 36p valuation.

Island Steel filed notice of intention to appoint an administrator on 23 January, after one of its suppliers — German steel processor Wupperman AG — issued a statutory demand for payment of its outstanding debt, of around £391,000, by 22 January.

In the same month, Portuguese steel firm Lusosider told Island Steel it would pursue its historical claim for £3mn. Lusosider and Island Steel have been in dispute since around 2019, with Island Steel filing a counter-claim against Lusosider for around £2mn.

Silver Birch made the only bid for the company. A number of other interested parties withdrew their interest after entering the data-room established by administrators.

Island Steel generated £1.37mn in revenue over July-December and made an operating loss of £1.32mn. Its revenue declined from a peak of around £55mn in the 2018 financial year, to £20.45mn in 2022 and £10.39mn in the 2023 financial year.

It had a £1.25mn secured loan against its plant and machinery from asset-based lender White Oak, as well as a £500,000 confidential invoice discounting facility from White Oak. In addition, it had a £2.6mn charge from UK lender Together Commercial Finance, for a mortgage facility provided to Island Steel's only shareholder, Tocs Holdings. Island Steel had sold the property to its holding company and was leasing it back.

White Oak, which was fully repaid, is also supporting Silver Birch Steel.

By Colin Richardson