British Steel’s owners charging firm £20m a year in fees and interest


Steel industry British Steel's owners charging firm £20m a year in fees and interest

Greybull Capital, which owns the Scunthorpe steelworks, is seeking government aid

A British Steel worker at the Scunthorpe plant. Greybull Capital has charged £33.8m interest on loans to the firm. Photograph: Steve Morgan/British Steel/PA

The multi-millionaires who bought British Steel for £1 in 2016 and are now seeking financial aid from the government are charging £20m a year in fees and interest from the company.

Marc Meyohas and Richard Perlhagen are in talks with British Steel’s lenders over a £75m rescue package that is understood to be at risk of falling apart unless the government contributes.

The company, which owns the Scunthorpe steelworks, claims that without the new funding it could collapse, putting 4,500 jobs at risk.

Meyohas and Perlhagen, the sons of a wealthy French corporate lawyer and Swedish pharmaceuticals tycoon Lennart Perlhagen, respectively, have charged £33.8m in interest on loans their private equity fund Greybull Capital made to British Steel at a rate of 9.6%, according to filings at Companies House.

The money was loaned via a Greybull business registered in the tax haven of Jersey. The firm said the offshore structure was not designed to avoid tax.

The pair, who run their investment fund from offices above a Jimmy Choo store on Sloane Street, around the corner from Harrods in central London, have also charged British Steel £6m in “management fees” since they took control of the Scunthorpe works in 2016.

As part of Greybull’s rescue of the plant from Tata Steel, staff took a pay cut in the first year and about one in 10 were laid off in an efficiency drive.

A spokeswoman for Greybull said the £250,000-a-month management fees charged to British Steel were for “extensive” services “charged at a significant discount to normal market rates”.

The spokeswoman said Greybull was charging such a high rate of interest on its loan because of British Steel’s low credit rating. She added that British Steel had yet to pay the interest bill to its owners.

“Most importantly no interest has been paid by British Steel to Greybull since our acquisition of the business in 2016,” she said. “All interest has been accrued and not paid. This has been done in order to support British Steel’s financial position through its turnaround.”

The attempt to raise £75m in funding comes less than a fortnight after the government provided British Steel with an emergency £120m loan to cover a bill from the EU for its carbon dioxide emissions.

The prime minister said on Wednesday that she could not comment on “the future of Greybull Capital-owned British Steel” but conceded that it was a “worrying time” for employees and their families.

“Last month the government did enter into a commercial agreement with British Steel relating to their obligations under the EU emissions trading scheme which has provided support to that company,” she added.

Greybull says that it is “passionate about making companies successful”. However, as well as British Steel, the firm backed the attempted rescues of Monarch Airlines; retailers Comet Group, Game Group and My Local; and Rileys snooker hall business. All of those businesses collapsed, putting several thousand people out of work.

While almost 1,900 Monarch workers were made redundant (and more than 100,000 holidaymakers left stranded overseas) when Monarch collapsed in 2017, Greybull was the top creditor, collecting almost £60m from the administration. Greybull also collected part of a £50m payment as one of the main creditors in the collapse of Comet, in which 7,000 people lost their jobs.

Meyohas has said he decided to set up Greybull in the wake of the financial crisis, when traditional banks withdrew lending, as he spotted an opportunity to charge higher fees.

“We felt there was going to be opportunities for providing capital to companies that wanted to develop themselves – either grow or restructure – particularly after the Lehman crisis, when a lot of banks and capital providers decided to shut up shop,” he told Bloomberg.

The Scunthorpe steelworks is one of the last two left in Britain along with Port Talbot in south Wales, after the Redcar facility on Teesside closed in 2015. It supplies steel for customers including Network Rail and supports 22,000 jobs in its supply chain, on top of 4,500 direct employees.


Original Article


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