White Oak: why the ‘white knight’ is so attached to Gupta’s metals group

When the Serious Fraud Office confirmed it was investigating Sanjeev Gupta’s GFG Alliance on Friday, the metals group’s would-be rescuer appeared to walk away.

White Oak Global Advisors, which had agreed terms on two emergency finance deals with Gupta’s Australian and British steelworks, said on Friday it was “not in a position to continue discussions with any company that is under investigation by the Serious Fraud Office for money laundering”.

Hour later, it put out an apparently contradictory statement, with respect to GFG’s Australian businesses: “White Oak continues its efforts to refinance Liberty Primary Metals of Australia’s debt subject to financial due diligence and acceptable governance.” 

White Oak had been surprisingly willing to lend to GFG in the first place despite reports of suspected fraud. GFG has denied wrongdoing and pledged to “co-operate fully” with the SFO probe.

Now it seems that — despite its initial statement — White Oak may be willing to finance a company that is the subject of 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 existing exposure to the metals group.

White Oak has already taken on significant exposure to GFG, according to documents seen by the Financial Times and people familiar with the matter. 

Last year, as Gupta’s main backer Greensill Capital came under pressure to reduce its exposure to the industrialist’s companies, White Oak intervened to help, according to four people with knowledge of the matter.

In spring 2020, it started buying the steel tycoon’s debt from the supply-chain finance group, ramping up the activity over the summer, two of the people said. It was structured through complicated deals that provided an option for Greensill to later buy it back, the people said. 

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

“[It is] known for off-the-wall transactions and sitting in the tricky bit of the capital structure,” according to one person who has worked with White Oak. Another described it as “quite an aggressive fund”, saying the lender would have been looking for “very, very good returns”. 

A White Oak spokesman said it did not “recognise or agree with this characterisation” of the company. “For over a decade we have been a trusted partner to thousands of SMEs across the world who we have helped grow their businesses through financing,” he said.

The company has carved out a significant role in a fast-growing corner of financial markets in which private groups, less regulated than banks, make business loans that banks would typically deem too risky — often at eye-watering interest rates.

It has drawn investment from the pension funds of groups as diverse as teachers in Lancashire, nurses in New York and workers at Boeing, as they seek access to the higher returns that riskier lending can offer. 

And it has established itself as a provider of UK taxpayer-backed loans to small businesses under a Covid-19 emergency scheme, handing out £250m to around 800 businesses, according to its chief executive Andre Hakkak. The loans were made by its British arm, a 35-year-old lender based near Chester that was known as LDF Group before White Oak bought it in 2018. 

“Some people have referred to us as a white knight,” Hakkak said in a video interview with specialist publication ABL Advisor last month. “If you talk to some of our borrowers, they’re very pleased for us to come in quickly and underwrite the credit and try to make them survive and thrive in a difficult environment.” 

However, he said, such business was risky: “How much risk do you want a manager to take in order to get 10 per cent returns? That’s the real question.” 

White Oak had been willing to agree terms to fund parts of Gupta’s sprawling industrials empire — an estimated A$430m (£236m) deal to refinance his Australian steelworks and a £200m lifeline for his British steel plants — at a time when others had not.

White Oak’s statement that it would walk away from talks created uncertainty for thousands of workers at GFG’s steel plants. The company’s plants in Yorkshire, which employ about 1,800 people, have been under particular pressure from the collapse of Greensill and the decline in demand from aerospace customers due to the pandemic.

The two main plants at Rotherham and Stocksbridge count some of Europe’s biggest manufacturing companies among their clients, including Rolls-Royce, JCB and Safran. Managers at the plants have been able to keep operating on an intermittent basis despite the desperate need for working capital thanks to securing commitments from specific customers for their steel. 

White Oak’s relationship with GFG goes back at least to February 2019, when the US group provided a A$200m borrowing facility to Liberty’s Australia business. Greensill put in A$545m alongside it. 

It worked out well for White Oak. GFG raised a high-yield bond in the autumn of that year to pay back the debt, repaying the loan with a 10 per cent yield, a person close to the matter said.

White Oak subsequently stepped in to buy Liberty Commodities’ debt from Greensill, totalling more than $200m, according to one of the people with knowledge of the matter.

Greensill and GFG Group declined to comment. 

David Cameron, the former prime minister who worked as an adviser to Greensill, told a select committee on Thursday that he “asked a lot of questions” about Greensill’s exposure to GFG. “The reassurance I always got was that there was a plan to deal with this concentration,” he said. 

As of early March this year, White Oak had close to $300m in exposure to Gupta’s Liberty Commodities, which was due to mature on May 20, a document seen by the FT shows. 

White Oak has also agreed to lend money to Westford Trade Services, a trade finance firm that has conducted extensive business with Gupta’s Liberty Commodities. 

It provided Westford in May 2020 with an “uncommitted revolving trade finance facility”, typically a short-term funding arrangement, according to documents filed with Companies House which show White Oak has a charge over Westford. 

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

White Oak had made a foray into crisis-hit steel businesses before lending to Gupta’s empire. It provided a £90m funding line to British Steel in July 2018, less than a year before it collapsed under previous owner Greybull Capital. 

Hakkak at the time said the “partnership” represented “White Oak’s continued commitment and ambition for the UK and broader EU market”. 

As British Steel teetered on the brink of insolvency, White Oak held talks with Liberty about a possible takeover bid for the company, according to people aware of the matter. 

Although that did not go through, the lender managed to get its money back when the firm went into liquidation, despite ranking below some senior secured lenders in the queue for repayment. 

 “They were very commercial and hard-nosed,” one person familiar with their role at the time said. “They would have charged their pound of flesh from Gupta.”

Additional reporting by Oliver Barnes

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