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White Oak: Why is the “white knight” so closely associated with Gupta’s metal band?

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When the Office of Serious Fraud confirmed on Friday that Sanjeev was investigating Gupta’s GFG Alliance, it appeared that the potential rescuer of the metal group had left.

White Oak Global Advisors, which agreed to two emergency financial agreements with Gupta’s Australian and British steelmakers, said on Friday that “there is no way to continue discussions with any company investigated by the Office of Serious Fraud for money laundering.” .

Hours later, it was seemingly contradictory about GFG’s Australian business: “White Oak continues to make efforts to refinance Liberty Primary Metals Australia’s debt with due diligence and acceptable governance.”

White Oak was surprisingly willing to lend to GFG despite allegations of fraud. The GFG has denied any wrongdoing and is committed to “fully cooperating” SFO probe.

It seems that, despite the initial statement, White Oak may be willing to fund a company that is the target of an SFO investigation.

The reason may be that the private lender in San Francisco is not a new “white knight,” but a company trying to manage exposure to the metal group.

Last year, as Gupta’s chief aide was under pressure to reduce exposure to companies in the Greensill Capital industry, White Oak intervened to help, according to four people who knew the subject.

In the spring of 2020, the supply chain’s financing group began buying steel magnate’s debt, the two people said, with activity increasing in the summer. People said Greensill was then structured through intricate deals that offered the option to repurchase.

White Oak provided funding directly to Gupta’s Liberty team.

“[It is] known for off-the-wall transactions and sitting in the most difficult part of the capital structure, “said one person who worked with White Oak. Another said it was a” fairly aggressive fund, “saying the lender would seek” very, very good returns. ”

White Oak said he did not “know or agree with that characterization.” “For more than a decade we have been trusted partners of thousands of SMEs around the world, and we have helped them grow their businesses through financing,” he said.

The company has played an important role in a fast-growing corner of the financial markets, as private groups, less regulated than banks, provide business loans that would normally be too risky – often with interesting interest.

He has invested in pension funds from various groups such as Lancashire teachers, New York nurses and Boeing staff as they seek access to higher returns that risky loans can offer.

Under the Covid-19 emergency scheme, it has established itself as a provider of loans to small businesses backed by UK taxpayers, distributing £ 250 million to around 800 companies, CEO Andre Hakka said. The loan was made by his British army, a 35-year-old lender around Chester, known as LDF Group, which was bought by White Oak in 2018.

“Some people have named us white knights,” Hakkak said in a video interview with the specialist publication ABL Advisor last month. “If you talk to some borrowers, they’re very happy to come in with us quickly and hire credit and survive in a difficult environment and try.”

However, he said the business was risky: “How much risk do you want a manager to take to achieve a 10 percent return? That’s the real question.”

White Oak was willing to agree on terms to finance parts of Gupta’s industrial empire – an estimated budget of approximately $ 430 million (£ 236 million) to finance the Australian steelworks and a € 200 million bailout for British steelmakers – while others did not. .

The fact that White Oak would withdraw from the talks created uncertainty for thousands of GFG steelmakers. The company’s plant in Yorkshire, which employs about 1,800 people, has come under special pressure as a result of falling Greensill and a pandemic due to declining demand from aerospace customers.

The two main plants in Rotherham and Stocksbridge have some of the largest manufacturing companies in Europe among them, including Rolls-Royce, JCB and Safran. Plant managers have been able to continue to operate despite the constant need for working capital to secure steel for the commitment of specific customers.

White Oak’s relationship with GFG dates back to at least February 2019, when the U.S. group lent $ 200 million to Liberty’s Australia business. Greensill put $ 545 million next to it.

It came out well for White Oak. GFG he raised a high-yield bond to pay off the debt in the fall of that year, with the loan repaid at a rate of 10 percent, said one person on the subject.

White Oak later went in to buy Liberty Commodities ’debt from Greensill for a total of more than $ 200 million, according to people who know about the issue.

Greensill and the GFG Group refused.

David Cameron, a former prime minister who served as an adviser to Greensill, told a select committee on Thursday that he had asked “numerous questions” about Greensill’s impact on the GFG. “The peace I always got was that there was a plan to deal with that concentration,” he said.

In early March of this year, White Oak had about $ 300 million in Gupta’s Liberty Commodities, which was due to arrive on May 20, documents seen by FT.

White Oak has also agreed to lend the money to Westford Trade Services, a commercial finance company that has done a lot of business with Gupta’s Liberty Commodities.

Westford issued a “non-binding revolving commercial financial facility” in May 2020, usually a short-term financing agreement, according to documents presented to the White House showing that the White House holds Westford’s position.

Westford Limited, a Hong Kong-registered company in the same group, is listed as a user of Greensill’s supply chain financing products that were sold through the Bank’s Suisse funds, which were canceled in March, according to a report by the bank. . Westford did not respond to requests for comment.

White Oak signed into a crisis-stricken steel business before lending to the Gupta empire. It provided a € 90 million financing line to British Steel in July 2018, a year before it fell under previous owner Greybull Capital.

At the time, Hakkak said the “partnership” indicated “White Oak’s commitment and ambition to the UK and the EU’s broad market.”

While British Steel was on the verge of bankruptcy, White Oak had talks with Liberty about a possible takeover bid for the company, according to people who are aware of the issue.

Although that didn’t happen, the lender managed to get his money back when he went to liquidate the company, despite being placed under some senior lenders in the repayment queue.

“They were very commercial and had a hard nose,” said one person who knew the role at the time. “They would charge Gupta a pound of charge.”

Additional report by Oliver Barnes

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