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Handful of bids expected for British Steel by June 30 deadline - sources

Handful of bids expected for British Steel by June 30 deadline - sources
FILE PHOTO: A general view shows the British Steel works in Scunthorpe, Britain, May 21, 2019. REUTERS/Scott Heppell -
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Scott Heppell(Reuters)
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By Clara Denina and Barbara Lewis

LONDON (Reuters) – British Steel, which went into liquidation in May, has attracted interest from up to nine possible buyers, but far fewer firm bids are expected by an extended June 30 deadline, banking and industry sources said.

Britain’s second largest steel producer was put into compulsory liquidation on May 22 after Greybull Capital, which bought the company from Tata Steel <TISC.NS> for a token one pound three years ago, failed to secure extra funding to continue running it.

A closure of the company, which produces high-cost long steel products used in construction and rail networks, would jeopardise 25,000 jobs, including 5,000 in Scunthorpe, northern England.

Sources said that India’s JSW Group <JSTL.NS>, former owner Greybull, Sanjeev Gupta’s GFG Alliance, private equity firm Endless, a Ukrainian and two Chinese steelmakers were among the interested parties.

One of the sources said that executives from multiple companies had been seen inspecting the Scunthorpe plant over the past three weeks, but only a handful would take the process further.

“The number of serious bidders can be counted on one hand, especially if the ideal deal means an offer for the whole business,” another source said.

“It’s …an issue of profitability and need for a comprehensive turnaround plan,” the source added.

British Steel’s Official Receiver and adviser EY has been busy reaching out to Asian and European steel companies to sound out their interest, but many have declined the invite.

The office handling the liquidation of the company said in May that around 80 companies had been given access to the books and had initially set a deadline by June 12. This was then extended to June 30.

Sources previously told Reuters that none of the potential buyers would be willing to take on the whole company, even for a nominal sum, due to the need for capital expenditure to make it profitable after years of underinvestment.

The European steel industry as a whole says it faces a crisis as U.S. imports tariffs are pushing extra volumes of steel into Europe.

On top of that, steelmakers in Britain pay some of the highest green taxes and energy costs in the world, and face high labour costs and business rates.

Industry executives also say that uncertainty over Britain’s departure from the European Union means it remains unclear whether the country would benefit from EU safeguarding measures to protect the European steel industry.

British Steel has a series of contracts to supply steel rails to customers in Britain, Italy, Spain, Belgium and other European countries, as well as a 60,000 tonne a year supply contract with digger maker Caterpillar.

It sources iron ore and coal, essential primary materials in the making of steel products, from several countries including Australia, Brazil and Argentina.

(Reporting by Clara Denina and Barbara Lewis; Additional reporting by Pratima Desai; Editing by Jane Merriman)

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