White Oak: Why is “White Knight” so closely connected with Gupta’s metal group

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When the Office of Serious Fraud confirmed on Friday that it was investigating Sanjeev Gupta’s GFG alliance, the metal group’s potential rescuer appeared to have walked away.

White Oak Global Advisors has reached two emergency financing agreements with Gupta’s Australian and British steel mills and said on Friday that it “has no capacity to continue money laundering discussions with any company under investigation by the Office of Serious Fraud”. .

A few hours later, it issued a clearly contradictory statement regarding GFG’s Australian operations: “White Oak continues to work hard to refinance Liberty Primary Metals Australia’s debt, subject to financial due diligence and acceptable governance.”

Despite reports of suspected fraud, White Oak was initially unexpectedly willing to lend to GFG. GFG denies wrongdoing and promises to cooperate with SFO probe.

It now appears that despite the initial statement, White Oak may be willing to fund a company conducting an SFO investigation.

The reason may be that the San Francisco-based private lender is not a fresh “white knight”, but a company trying to manage the existing exposure of the metal group.

According to four people familiar with the matter, when Greensill Capital, Gupta’s main supporter, was under pressure to reduce its contact with industrial companies last year, White Oak intervened to help.

Two people familiar with the matter said that in the spring of 2020, it began buying debts of steel tycoons from supply chain finance groups, and increased trading activities in the summer. People familiar with the matter said that it was formed through a complex transaction, providing Greenseal with the option of repurchasing in the future.

White Oak also directly provided financing to Gupta’s Liberty Group.

“[It is] A person working with White Oak said, “It is known for ready-made transactions and is in a tricky position of capital structure.” Another person described it as a “quite aggressive fund”, calling the The lender will always be looking for “very, very good returns.”

White Oak said it “does not recognize or agree with this characteristic of the company.” It said: “For more than ten years, we have been a trusted partner of thousands of small and medium-sized enterprises around the world. We have helped them develop their businesses through financing.”

The company has played an important role in the fast-growing financial market, where commercial loans provided by private groups with weaker banking supervision are often considered by banks to be too risky-usually at staggering interest rates.

It attracted investment from the pension funds of various groups such as teachers in Lancashire, nurses in New York, and workers in Boeing as they sought the higher returns that riskier loans could provide.

The company’s chief executive officer Andre Hakkak said that under the Covid-19 emergency plan, it has become a provider of small business loans supported by British taxpayers, disbursing 250 million pounds to approximately 800 businesses. . These loans are provided by its UK branch, which is located near Chester and is a 35-year-old lender known as LDF Group before White Oak acquired it in 2018.

“Some people call us the White Knights,” Hakak said in a video interview with professional publication ABL Advisor last month. “If you talk to some of our borrowers, they are very happy that we can quickly step in and provide guarantees for credit, and try to make them survive and grow survive in a difficult environment.”

However, he said that such a business is risky: “How much risk do you want the manager to take in order to get a 10% return? This is the real question.”

White Oak has always been willing to agree to the terms of funding part of Gupta’s vast industrial empire-a transaction of approximately 430 million Australian dollars (236 million pounds) provided financing for his Australian steel mill and his British steel mill The lifeline of 200 million pounds-when no one else has it.

White Oak’s statement that it will abandon the talks has created uncertainty for the thousands of workers at the GFG steel plant. The company’s facility in Yorkshire has approximately 1,800 employees, and is particularly pressured by the collapse of Greensail and the decline in demand from aerospace customers due to the pandemic.

The two major factories in Rotherham and Stocksbridge have attracted some of Europe’s largest manufacturing companies, including Rolls-Royce, JCB and Safran ( Safran). Despite the urgent need for working capital, the managers of the plant were able to maintain intermittent operations due to ensuring the commitment of specific customers to steel.

White Oak’s relationship with GFG can be traced back to at least February 2019, when the American group provided Liberty’s Australian business with a loan line of A$200 million. Greensill (Greensill) invested 545 million Australian dollars.

It works well for white oak. GFG Raised high-yield bonds A person familiar with the matter said that the debt was repaid in the fall of that year and the loan was repaid at a yield of 10%.

A person familiar with the matter said that White Oak subsequently intervened in the purchase of free goods debt from Greenseal, totaling more than $200 million.

Greensill and GFG Group declined to comment.

Former Prime Minister David Cameron, who served as Greenseal’s adviser, told a select committee on Thursday that he “raised a lot of questions” about Greenseal’s (GFS) exposure to GFG. He said: “I always get the assurance that there is a plan to solve this problem.”

A document seen by the British “Financial Times” showed that as of early March this year, White Oak had nearly $300 million in Gupta Free Commodity Fund exposure, and the bond was originally scheduled to expire on May 20.

White Oak also agreed to lend to Westford Trading Services, a trade finance company that has extensive business dealings with Gupta’s Free Commodities Organization.

According to documents submitted to Companys House, White Oak filed a lawsuit against Westford, which in May 2020 provided Westford with “uncommitted revolving trade financing facilities,” usually short-term financing arrangements.

A report by the bank showed that Westford Co., Ltd., a company registered in Hong Kong by the same group, was listed as a user of Greensail’s supply chain finance product, which was approved by the bank’s Credit Suisse, which was suspended in March. Funds are sold. . Westford did not respond to a request for comment.

Before White Oak lent it to the Gupta empire, it was involved in steel companies hit by the crisis. It provided British Steel with a £90 million financing facility in July 2018, and less than a year later it collapsed under the bankruptcy of its former owner Greybull Capital.

The Hakka said at the time that the “partnership” represented “White Oak’s continued commitment and ambition to the UK and the EU market as a whole.”

According to people familiar with the matter, as British Steel was on the verge of bankruptcy, White Oak and Liberty discussed a possible takeover offer for the company.

Although this did not happen, when the company was liquidated, the lenders managed to recover the funds, even though they were ranked below some senior secured lenders in the repayment queue.

A person familiar with their role at the time said: “They are very commercial and behave appropriately.” “They could have taken a pound of meat from Gupta.”

Additional report by Oliver Barnes

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