Some raw material suppliers to Liberty Steel’s European and UK operations are limiting their exposure to the company, and in some cases demanding cash in advance before making sales.
Scrap suppliers to Liberty Speciality want cash upfront before delivery, while others — including iron ore suppliers — are doing the same to rolling lines and limiting their exposure to the company.
Certain mainstream credit insurers have not been offering cover on Liberty for some time, given the entity’s loose corporate structure and opaque financing — which the company has said in recent years it would address. Other large credit insurance policies expire imminently, and will need to be renewed, which could be difficult in light of recent news.
The need to pay cash for raw materials could hasten a liquidity crunch, with the insolvency of a primary lender — Greensill Capital — meaning that Liberty will have to refinance working capital at some point as that facility unwinds.
Liberty parent firm GFG Alliance “has adequate current funds and its plans to bring in fresh capital through refinancing are progressing well”, the firm said. “We are benefiting from a recovery in steel and aluminium markets, which means that most of our businesses are running at near full capacity to meet high demand and are generating positive cash flows.”
Liberty itself has also changed terms on UK buyers in the last week or so. The company has moved from 60 days after end of month terms to 30 days from delivery date, a significant reduction, which some suggest points to its need for cash.
Buyers complained that the move was announced in an offer, rather than in a letter explaining the reasoning.
Leadership at the company’s Liege-Dudelange galvanising lines recently told some customers that the sites still needed to deliver orders confirmed for May 2020, given a delay on substrate from their primary supplier. But the company has recently finished renegotiations with some buyers after it looked to cancel contracts at the end of last year, citing rising costs and supply issues.
By Colin Richardson