The Chinese owners of British Steel are gearing up to try to recover hundreds of millions of pounds of loans from the company after the UK government took over its operations.
Jingye Group said it was assessing the chances of recovering hundreds of millions of pounds in debts owed to it by British Steel, and is thought to have engaged advisers at the accountancy firm PwC to work out a valuation for the business.
The Labour government took control of British Steel’s operations in April with emergency legislation after it became concerned that Jingye was planning to let blast furnaces at Scunthorpe cool. That would have led to 2,700 immediate job cuts as well as the symbolic loss of Britain’s ability to make steel from iron ore.
Jingye is still the legal owner of British Steel, despite the takeover. British Steel owed Jingye businesses £711m at the end of December 2023, according to previously published accounts.
The bulk of those debts, £434m, is owed to Jingye’s Chinese subsidiaries. Another €312.5m (£266m) is owed to Jingye’s British holding company, Jingye Steel (UK) Holding Ltd.
In newly released accounts for the UK company, Jingye said it is “currently assessing the recoverability of these balances and the potential for a commercial settlement”. However, it cautioned that “due to the complexity of the arrangements and the ongoing nature of discussions, it is not yet possible to reliably estimate the amount or timing of any recovery”.
The accounts suggest that Jingye is gearing up for negotiations with the government over the size of the debt repayment. Those debts would probably have been wiped out in the liquidation planned by Jingye, but were preserved by the government intervention.
The Financial Times has previously reported that the government had considered legislation to wipe out the debts, although that would probably raise significant opposition from investors as it would represent the direct expropriation of privately held assets.
Jingye also said it expected a “commercial resolution” in relation to the ownership of the business, suggesting it may hope to receive a payment for its shareholding. It has engaged the law firm Linklaters to advise on recovering money, Sky News first reported.
PwC is preparing a valuation of British Steel’s assets, according to a person with knowledge of the business. PwC previously advised Jingye in the deal process to take over British Steel in 2020.
PwC declined to comment. British Steel declined to comment. Jingye has been approached for comment.
