Coronavirus: Steelmaker Celsa agrees pay curbs in 拢30m state loan deal
Celsa has agreed conditions relating to net-zero emissions, taxes and pay in exchange for a government loan, Sky News learns.
Monday 22 June 2020 11:57, UK
A Spanish-owned steel producer has agreed to tough new curbs on executive pay and dividends in exchange for a 拢30m government loan that could result in British taxpayers becoming shareholders in the company.
Sky News has learnt that Celsa UK Holdings has signed up to a series of commitments - encompassing its route towards becoming a net-zero carbon emissions company, the safeguarding of its local workforce in Wales, transparency around its tax arrangements, and restraining executive payouts - in order to secure the loan from Whitehall.
Steel industry sources said ministers were expected to make an announcement about the financial aid package to Celsa by the middle of the week - a deal that will set a critical precedent for further government intervention in British industry during the coronavirus crisis.
The series of undertakings made by Celsa will be the broadest agreed so far by a private company seeking state support during the COVID-19 pandemic.
Ministers have already imposed pay and dividend restrictions on companies accessing government-backed loans of up to £250m under the Coronavirus Large Business Interruption Scheme.
Companies utilising the Covid Corporate Financing Facility - a commercial paper scheme run by the Bank of England - are also subject to those constraints.
Sky News revealed last week that Celsa had agreed to give the government warrants that could convert into a 20% equity stake in the company.
That agreement will remain in place until the end of next year, according to one insider.
Celsa's UK arm is the country's biggest producer of reinforcement steel, which is used by the construction industry and is seen by ministers as strategically important to the economic recovery.
The company is a subsidiary of Spain's Celsa, one of Europe's biggest steel producers.
Ministers at the Department for Business, Energy and Industrial Strategy are said to have driven "a hard bargain" over the terms of the loan.
As part of the deal, Celsa Steel UK's existing lenders are understood to be lending a further £50m to the company.
In total, the group employs about 1600 people in the UK, with the majority based at its plants in Cardiff.
The structure of the government's impending loan agreement underlines the Treasury's willingness to consider taking direct shareholdings in companies it regards as being of strategic importance to key industries during the COVID-19 pandemic.
Its assessment of loan requests from companies which are unable to access other coronavirus support schemes is being undertaken through Project Birch - the existence of which was revealed by Sky News last month.
Some companies have been unable to access CLBILS loans or the CCFF, either for reasons of eligibility or because the funding they provide is not sufficient to ease funding challenges.
During the crisis, companies including McLaren Group, Petroineos, Jaguar Land Rover and Virgin Atlantic Airways have all made such approaches.
The steel industry is deemed by senior ministers to be of national importance, meaning the government may view other funding requests from the industry sympathetically.
Tata Steel UK, owner of the vast steelworks at Port Talbot, has approached ministers about securing a £500m government loan, while talks have also been taking place between officials and other players in the sector, including Liberty Steel and British Steel, which is now owned by the Chinese conglomerate Jingye Group.
The government has sought to emphasise that companies should be exploring securing financing from existing shareholders and lenders before approaching it for taxpayers' support.
Celsa, which is one of Europe's biggest steel groups, has also sought access to government guarantee schemes in Spain.
The company employs more than 9000 people around the world.
Neither Celsa Steel UK nor BEIS could be reached for comment.