Metals Tycoon Seeks to Delay Payments to Greensill

Greensill’s operations seized up last week when Credit Suisse Group AG froze $10 billion in investment funds that were critical to the startup’s functioning. Regulators have since taken over its banking unit.

The unwinding has rippled through investors, venture-capital firms and German municipalities that deposited money with Greensill’s bank. But GFG Alliance, an umbrella company for the Gupta family’s businesses, is one of the most closely connected to the supply-chain finance specialist.

The GFG Alliance group of companies is negotiating with Greensill representatives for a standstill agreement in which both parties wouldn’t need to make payments to each other.

Greensill had $5 billion in loans outstanding to GFG Alliance, according to a person familiar with the relationship.

On Tuesday, Mr. Gupta told British union officials that Greensill’s difficulties create “a challenging situation which needs careful management,” according to a transcript of his remarks, seen by The Wall Street Journal. Mr. Gupta added at the online meeting that GFG Alliance has adequate funding, but that it was looking to refinance the business, which could take time.

In a typical supply-chain finance deal, Greensill would pay a company’s suppliers sooner than they would normally expect, but at a discount. The company then would pay Greensill the full amount down the road. But Greensill also paid GFG Alliance companies for future profits on the sale of steel and other products, meaning payments could flow both ways.

Greensill has separately looked at seizing GFG Alliance assets in Australia, but has yet to act, according to another person familiar with the matter.

With its major lender now bankrupt, Mr. Gupta is looking for new finance, and reassuring current clients that his companies are trading as normal. Last week, the Anglo-Indian entrepreneur flew to Switzerland to talk to at least one bank, while also visiting the aluminum trading business of commodities giant, Glencore PLC, according to a person familiar with the matter.

On Tuesday, Mr. Gupta told union officials that he has asked all of his businesses to “manage cash carefully and reduce their reliance on group funding,” according to the transcript.

GFG Alliance is also talking to customers and suppliers to try to improve cash flow, while looking to secure additional working capital facilities and tapping furlough program payments set up by governments during the pandemic, he said.

Mr. Gupta’s sprawling GFG Alliance owns more than 200 manufacturing assets and employs 35,000 people. Its interests range from steel plants, mines, energy companies and a bank, to a small Scottish bicycle manufacturer and a company that makes parts for vintage cars.

The company has expanded rapidly in recent years, buying up unloved steel and aluminum assets, often in places with little other skilled employment, meaning governments from France to Australia are waiting to see how Greensill’s demise will affect GFG Alliance’s operations in their country.

So too are those employed by GFG Alliance operations, and the other companies that do business with them,

There are around 600 companies in South Australia that supply goods or services to GFG Alliance in that region, according to John Chapman, a government-appointed official in that region. GFG Alliance’s Liberty Steel owns the giant Whyalla Steelworks there.

Last week, Mr. Chapman wrote to Mr. Gupta, asking for assurance that local suppliers would continue to be paid on time. Mr. Chapman, who is the South Australian Small Business Commissioner, said he was yet to receive a reply, as of Tuesday.

Mr. Chapman said some suppliers have expressed concerns to him about the potential for late or no payments from GFG Alliance companies because of Greensill’s problems, but none have seen this yet.

GFG Alliance’s Liberty Steel business bought Whyalla out of voluntary administration in 2017.

“We are just trying to make sure we don’t go back there,” Mr. Chapman said.

Australia’s Minister for Industry Karen Andrew has been monitoring the situation closely, her spokesperson said.

In the U.K., where Mr. Gupta is based, Liberty Steel’s biggest customers say the company has been asking for earlier payments for its products. Individual plant managers have been calling round customers reassuring them that they are fine, one buyer said.

In France, the government has been watching events closely, given GFG Alliance’s businesses in industrial and former industrial parts of northern France. Finance Minister Bruno Le Maire said Tuesday that given the risk to jobs, the government would step in should there be financial difficulties at these businesses.

—Alice Uribe and Noemie Bisserbe contributed to this article.

Write to Alistair MacDonald at [email protected] and Rhiannon Hoyle at [email protected]