Lenders to British Steel are urging the government to conclude efforts to find a buyer for the stricken business as they seek to protect their financial position amid mounting losses.
It is understood that White Oak ABL, an asset-based lender that agreed to lend £90m to British Steel in July 2018, has been lobbying advisers working on the auction of the company to bring it to a swift end.
Sources said that White Oak had expressed a view that British Steel’s main Scunthorpe plant, which employs more than 3,000 people, should be closed down unless a deal to salvage its future can be struck imminently.
A spokeswoman for White Oak declined to comment.
The growing pressure on the government’s Official Receiver (OR) to find a buyer for the business reflects lenders’ concerns that British Steel’s losses – which are said to be running at around £5m-a-week – are eroding possible returns to creditors.
It also highlights the awkward position in which the OR finds itself, given its obligation to act in creditors’ interest even as government ministers insist that the company will be funded until a buyer for the Scunthorpe plant is found.
EY, which is acting as special manager to the OR, is continuing to hold talks with two potential buyers of the whole of British Steel.
Sky News has previously reported that one of them is Erdemir, a Turkish steelmaker which has sought to distance itself from a takeover of the UK’s second-largest steel producer.
However, sources said on Tuesday that the bidding entity is in fact a vehicle affiliated to Oyak, Turkey’s military pension fund, which itself is the biggest shareholder in Erdemir.
The Oyak-related bid is understood to include plans to retain the Scunthorpe steelworks, but is seeking an indemnity for historic environmental liabilities at the plant, according to people close to the process.
The other principal bidder is Liberty House, the industrial conglomerate, although several insiders said that the Turkish bid was at this point the more likely to succeed.
Other parties continue to pursue individual or collections of British Steel assets, including TSP Projects, an infrastructure design consultancy.
Other bidders for parts of British Steel have included Greybull Capital, which was the company’s owner for three years before it collapsed, and Evraz, the Russian steel group.
Andrea Leadsom, the new business secretary, has visited the Scunthorpe plant since she inherited the crisis at the company from her predecessor, Greg Clark.
Nadhim Zahawi, a new minister at the Department for Business, Energy and Industrial Strategy, is also playing a key role in the efforts to find a buyer for British Steel, as is UK Government Investments, which sits within the Treasury.
As a consequence of the uncertainty surrounding the company’s future, EY has drawn up contingency plans for the possible closure of its vast Scunthorpe steelworks.
The company employs more than 1,000 employees elsewhere, while an estimated 20,000 jobs in its supply chain are dependent upon the company.
Since its collapse into liquidation 11 weeks ago, British Steel has been funded through a taxpayer-backed indemnity.
EY has told bidders that it would like to conclude a deal by the end of August, following the annual summer shutdown at Scunthorpe.
British Steel’s losses mean the prospect of a full takeover without some form of guaranteed state funding is remote.
Its collapse into insolvency came just weeks after Mr Clark handed a £120m government loan to the company to help it meet its obligations under an EU scheme for industrial polluters.
A further support package was due to be given to British Steel but was withdrawn at the eleventh hour amid concerns that it would breach state aid rules.
The company’s insolvency has prompted MPs on the business select committee to launch an inquiry into the future of the UK’s steel industry, although evidence sessions will not kick off until the autumn because of the ongoing sale process.
A BEIS spokesperson said recently: “This government will leave no stone unturned to get a good solution for British Steel at Scunthorpe, Skinningrove and on Teesside.
“The Official Receiver continues to run the business whilst the sales process is ongoing.”
