Credit Suisse has begun court action to push a $4bn trading business belonging to the metals magnate Sanjeev Gupta into insolvency, as it tries to recoup losses.
Citigroup, acting on behalf of Credit Suisse, began the action in London's insolvency court on Wednesday and are demanding repayment from Mr Gupta's GFG Alliance.
GFG has been struggling to finance its UK operations after its main financial backer went bust last month.
The group, which has 5,000 UK workers, plans to "vigorously defend" itself.
It also said it had enough capital across its wider global operations to get through its current crisis in the UK.
Credit Suisse is understood to have instructed administrators to file wind-up orders against Liberty Commodities Limited.
Liberty Commodities is one of the main units of Gupta’s metals trading arm and specialises in trading non-ferrous metals and steel. It had revenues of $4.2bn in the year to March 2020, and 13 employees, according to company filings. Before venturing into metals manufacturing, Gupta made his first fortune from commodities trading.
Gupta is attempting to negotiate a “standstill” agreement with Greensill’s creditors, which would allow his business to raise alternative financing.
A spokesman for GFG Alliance said the company was in “constructive discussions” with Grant Thornton “to negotiate a consensual and amicable solution on the way forward, which is in the best interests of all stakeholders”.
They added: "This dispute will take many months to play out in the courts, and in the meantime we are working hard on taking prudent steps to manage our cash and refinance our business.
Greensill specialised in loans meant to help large businesses pay their suppliers. It controversially raised money by packaging those loans and selling them off to banks like Credit Suisse, which then marketed them as low-risk investments to high-net worth clients.
Greensill was thrown into crisis after the insurers, and later Credit Suisse, withdrew support early in March, citing concerns about the firm’s management and the growing pile of complex loans linked to the GFG Alliance.
Meanwhile, Mr Gupta approached the UK government for a £170m government bailout last week, but was refused due to concerns over a lack of transparency at GFG Alliance, and fears that the money might have been used to fund its international operations.
GFG Alliance operates in 30 countries and employs around 35,000 staff. Liberty Commodities is one of the main units of Gupta’s trading business.
The business secretary, Kwasi Kwarteng, has said that all options are on the table to try to save Liberty Steel and its 3,000 UK workers, as well as the 10,000 jobs dependent on the firm across its supply chain.
Unions have urged the government to take the UK business into public ownership.