Sanjeev Gupta’s GFG Alliance has taken legal action in the British Virgin Islands to prevent creditors from taking over a subsidiary, in the latest sign of the metals magnate’s mounting difficulties.
Gupta has been fighting on multiple fronts to preserve his energy and commodities empire since March after the collapse of his main financial backer, Greensill Capital. The collapse has put heavy pressure on parts of GFG, including the Liberty Steel mill, which employs thousands of people in the UK and Australia.
GFG’s creditors initiated proceedings last month to put one of its companies, Simec UK Energy Holdings, into suspension of payments, a process often used to recover money from a borrower who has defaulted on obligations, such as making payment of loans.
The dispute has come to light because a company from the British Virgin Islands has a 43% stake in Britain’s largest tidal power company, Simec Atlantis Energy (SAE). It operates the world’s largest tidal stream project in the Pentland Firth off the coast near John o’Groats, near Britain’s northernmost point, and is also developing projects off the coast of Japan, China and France. .
SAE was forced to update the stock market on Wednesday, saying that GFG had informed it of the legal action, which is aimed at “challenging the validity of the receiver’s appointment.”
GFG’s creditors have no right to claim SAE, but the dispute has proved difficult for the smaller company, whose projects generate electricity from the tides using 20-meter-wide subsea turbines. It also converts coal-fired power plants to run on wood pellets.
Gupta purchased its stake in SAE in 2018. As part of the agreement, SAE added the brand and name of Simec de Gupta’s energy interests. The company is operationally separate from GFG, but GFG has the right to appoint two people to SAE’s board.
Other GFG companies have also faced efforts by creditors to recover money. Credit Suisse representatives have already started to act to insolvent Liberty companies in London and New South Wales, Australia.
GFG has not disclosed the identity of the creditor who named the British Virgin Islands receiver, and a spokesperson declined to comment on Wednesday.
The latest legal problems add to other problems facing Gupta. The UK Serious Fraud Office unveiled an ongoing fraud investigation into the GFG Alliance last month. That investigation, in turn, made Gupta’s efforts to find a new lender to replace Greensill that much more complicated, prompting an American investor to pull out of a planned deal.
SAE shares listed on the London Aim Stock Exchange fell 5% on Wednesday to 6.65 pence, almost all-time lows reached last month when Simec’s receivership was first revealed.