British steel facing administration

[Staunton]

Here's Daily Mail reporter Rachel Millard, writing in December 2017 under the headline Monarch owner now making millions from British Steel: Tycoons charging sky high interest for loans to Scunthorpe plant
 
The former owners of failed Monarch Airlines are set to extract millions from British Steel after loading it with debt, accounts reveal. Brothers Marc and Nathaniel Meyohas and business partners Richard Perlhagen and Daniel Goldstein are charging interest of 9.6 per cent on a £154million loan. Their private equity firm Greybull Capital snapped up British Steel, which employs 4,400 people in the UK, largely in Scunthorpe, for a nominal £1 to stop it going under in 2016. Employees took a pay cut to try to turn around the firm. But the French brothers are now set to rake in cash from the loan pumped in via a company in tax-haven Jersey as part of a £400million rescue package. They have already charged fees of £3million, and accounts reveal that a further £16million in interest was due last year.

It comes as Greybull is under fire for its ownership of collapsed airline Monarch. Nearly 1,900 workers were made redundant when Monarch went bust in October, forcing authorities [that's the taxpayer - you and me] to step in and help more than 100,000 holidaymakers get home. Greybull is believed to have reduced its exposure to losses through a complex deal with financing from airplane maker Boeing, and the private equity firm will get first say on any of the travel operator's assets. Meanwhile, Monarch customers and business partners are expected to lose out from the demise.

Last night, Greybull defended its loan to British Steel. It said: 'Greybull's investment structure is market standard and in line with the way many financial institutions provide capital to higher risk companies in the midst of a turnaround.' Greybull has not yet received any interest payments, as it has let British Steel defer them until it makes more money. The total debt has climbed to £167million. Greybull created British Steel out of Tata Steel's long products division, which it bought just as it was almost wiped out by a major downturn in the industry. Tata has since sold further assets and closed its heavily indebted inherited pension scheme, threatening workers' pensions and triggering a frenzy among financial advisers. Greybull then rebranded the division as British Steel and staff agreed a 3 per cent salary cut. British Steel has returned to profit for the first time since the industry collapsed, making £39million last year compared to a £65million loss the year before, on revenue of more than £1billion. Chairman Roland Junck, 62, said he was targeting around 10pc profit. Staff have been rewarded with a 5pc stake in the business.

Greybull said: 'We are delighted with the progress that British Steel has made since mid-2016. 'We are proud that the employees will share in the success of British Steel through the profit and share ownership schemes that we have put in place.' British Steel said: 'We have had nothing but strong support and help from Greybull since they rescued the business.' In the annual accounts yesterday, British Steel directors said: 'We have made great progress under our new ownership.'

 

https://www.dailymail.co.uk/money/markets/article-5153241/Monarch-owner-making-millions-British-Steel.html

 

 

Greybull employ routine venture capital techniques to extract value from an ailing enterprise: purchase the company at bargain basement price, load the company with debt, cut staff pay, strip the assets, then leg it to the nearest tax haven, leaving the taxpayer to clear up the mess.

[Voice of reason]

2 minutes ago, CaptainSwing said:

This is true.  Whereas Germany has traditionally seen a steel company (for instance) as being there primarily to make steel, the UK has traditionally seen it as being there primarily to make money.

I once saw a repeated news story from the 70s of a shipyard on Tyneside closing. A shop steward said 'we don't just make ships here, we make men'

Ok a bit 70s sexism maybe. But the point being there is so much more to a factory producing high value goods, paying and employing skilled people on good wages. There is untold benefits to society and communities of that factory operating.

Too late I fear, in this instance, as the rot has been allowed to set in for too long.