Scottish Govt. compelled to unveil the guarantee provided to Sanjeev Gupta’s GFG Alliance

The Govt. of Scotland has been compelled to reveal that the value of the taxpayer guarantee it delivered to distressed metal tycoon Sanjeev Gupta’s GFG Alliance was £586 million.

This huge amount was the total gross guarantee provided when GFG Alliance in 2016 acquired the Lochaber aluminium smelter near Fort William and two nearby hydropower plants from Rio Tinto.

The agreement incorporated the Scottish government guaranteeing 25 years of power purchases by Gupta’s GFG Alliance from another business owned by his father. Greensill Capital, the collapsed into insolvency finance company was then competent to convert this contract into £295 million of debt that shouldered the same credit rating as UK sovereign bonds, funding Sanjeev Gupta’s acquisition of the last remaining aluminium smelter in Britain.

The Indian born British Businessman Sanjeev Gupta was once praised as the “saviour of steel” due to his commitments towards restoring moribund metals plants, gathered widespread support in Holyrood for his proposal to buy the smelter.

However, his business slumped to calamity after Greensill’s downfall in March 2021. Following that the Frenched authorities initiated an investigation into Gupta’s business kingdom over alleged “misuse of corporate assets” and “money laundering”.

The ministers, who had contended that unfolding the size of the guarantee could pitfall GFG and be used to support calculate commercially sensitive information, were in due course overruled by the Scottish Information Commissioner in September 2021.

The transaction was the elemental significant deal Greensill carried out for Sanjeev Gupta, incepting a string of debt-propelled acquisitions that switched the commodities trader into a big industrialist proclaiming to employ 35,000 people around the world. But the level of exposure Greensill built up to Sanjeev Gupta’s GFG Alliance was a vital factor in its turndown, as the metals conglomerate commenced to default on more than $5 billion of debt it had borrowed from the supply-chain finance company.

The Scottish govt. dispensed its guarantee, which engulfed annual amounts varying between £14 million and £32 million, in return for a fee. Now, the fee had been valued in the government’s accounts at £21.4 million, but later it was written down to zero and a £33 million provision was created in regards to potential exposure to default.

The government also revealed that the net present value of the remaining guaranteed payments is now £285.9m.

The Scottish Government said; “The smelter had fulfilled all of its and GFG Alliance’s commitment to invest in a new recycling and aluminium billet plant there will secure the future of the operations, create new high-quality employment in the area and provide opportunities for the local supply chain.”