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UK government agrees £300m rescue package for British Steel

2019-08-14

New funds thought to be enough to secure a sale to widening list of interested private bidders

The government has moved to rescue British Steel with a financial support package worth as much as £300m that ministers believe will be enough to secure backing from a private bidder.

It is understood that the Department for Business, Energy and Industrial Strategy (BEIS) has agreed to substantially increase support to bidders for British Steel, which employs more than 4,000 people, after months of wrangling following the company's collapse into administration.

The rescue package will include beefed-up grants, indemnities and loans that could be worth as much as £300m, according to sources quoted by Sky News.

A Turkish pension fund is considered to be the frontrunner to takeover the company's main plant in Scunthorpe and subsidiaries across Teesside, although a consortium which includes a leading civil engineering firm working in west Africa is also in the running after making a late bid.

Despite the late interest from elsewhere, the business secretary, Andrea Leadsom, is expected to approve exclusive talks with Ataer Holdings, a subsidiary of the Turkish military pension scheme Oyak. An announcement that Ataer has won preferred bidder status could be made by the government's official receiver David Chapman and EY, which is managing the sale, as early as next week.

Ataer is believed to be the frontrunner after it committed to keeping all parts of the steel company together. While the plant in Scunthorpe makes up the vast majority of British Steel's operations, the government has so far expressed a preference for selling the company as a single entity, including satellite operations in areas such as Teesside.

The government has already provided a £120m loan to British Steel to help meet its obligations under an EU carbon credits scheme for industrial polluters. Nevertheless, the firm is understood to be losing £5m a week.

The Guardian has approached EY and BEIS for comment.

Earlier this week, BEIS said: “This government will leave no stone unturned to get a good solution for British Steel at Scunthorpe, Skinningrove and on Teesside.”

If discussions with Ataer break down, three bidders are waiting in the wings: Liberty House, led by Indian-born metals tycoon Sanjeev Gupta; Greybull Capital, the investment group which owned British Steel when it collapsed; and the west African consortium led by an as-yet unnamed civil engineering firm.

While not revealing its identity, the firm said it would not require any government assistance or grants, unlike some of the rival bids.

“The consortium is working on a long-term massive infrastructure project in west Africa,” said a source close to the company, which has masked its identity. “The successful purchase of the Scunthorpe site would mean an export opportunity of steel to this project – with immediate effect.

“The project has an estimated 10-year delivery timescale and has multiple related additional export opportunities for British steel to the region.”

Oyak pension fund's experience in the steel industry stems from its shareholding in the Turkish steelmaker Erdemir.

Liberty House would prefer to convert the Scunthorpe works from a blast furnace plant, which makes steel from scratch. It seeks government loan guarantees to replace the blast furnaces with electric arc furnaces, which would be used to make products by recycling scrap steel.

Greybull Capital is understood to be interested in picking up parts of the business if the government's preference for selling the whole business fails to materialise. In that case, the Scunthorpe steelworks would be likely to close for good.

The Turkish fund has offered to invest between £60m and £70m to take control of British Steel, according to sources.

Insiders told Sky News the funding would satisfy EU state aid rules, which Theresa May's administration claimed prevented ministers from providing support to British Steel before it collapsed into insolvency in May.

Source: The Guardian