Almost two weeks ago, The Grey Chronicles started these posts with a review of Pramod Mittal’s promise made at the inauguration of National Steel Corporation [NSC] in 04 February 2004. For the past week, this blog summarized the investment forays of Global Steel Holdings Ltd. [GSHL], headquartered in Dubai, from the Balkans, Bulgaria, Nigeria, Libya, India and Zimbabwe. The previous posts highlighted common insights to foreign investments behavior of GSHL, incorporated in 2005 in tax haven Isle of Manx. The obvious commonality is that almost all are mired with controversies. The Grey Chronicles also provided strikingly similar events in GSHL’s Philippine plant. Formerly known as National Steel Corporation, the plant, located in Iligan City, was privatized in 1995, declared a cessation of plant operations—shutdown—in 1999, liquidated in 2003, and officially re-opened as Global Steelworks Infrastructures, Inc. [GSII] in 2004.
In Mega-Deals, Crores Lost, GSHL increased its steel-producing capacity from being a mere India-based galvanizer in 1993 to become a global steel player in 2003. In 2008, India Inc (2008) stated that Pramod Mittal is “beating industry expectation”:
“But there is one dream he still cherishes and has kept it close to his heart: a dream to join the league of bigwigs of the global steel powers. … Known for his sharp intelligence, Pramod has been successfully steering the company and his steel empire grew 15 times since he got into business 15 years ago. … he is sure to reach his steely resolve – sooner than corporate pundits think.”
In 2003, GSHL partnered with Lukavac Coke & Chemistry Multiplant [KHK Lukavac] to form Bosnia’s Global Ispat Koksna Industrija Ltd [GIKIL]. Nezavisne novine (2008) wrote in May: GSHL was the favored buyer of GIKIL’s 16%, ultimately 51% of government’s stake in future sale. Presscut (2009) stated in February 2009 that GSHL has yet to invest BAM 46 million in GIKIL.
Next in line was a series of Nigerian contracts in 2004. Nigeria spent billions of dollars for its steel plants but snatched by GSHL for loose change through Dr. Olugbenga Obasanjo, son of incumbent President Olusegun Obasanjo (The News, 2007). The son was later indicted of N24-billion fraud (Leadership, 2008). Obasanjo’s successor, Umaru Yar’Adua, revoked the contracts on 01 April 2008 (LiveMint, 2008). Nigeria is also appealing the International Chamber of Commerce’s arbitration award of N399 billion to SOLGAS, Nigeria.
GSHL promised a US$400-million investment over 20 years for the rehabilitation of various Zimbabwe Iron and Steel Co. [ZISCO] facilities (The Engineering News, April 2006) but cancelled the same in 2006 after managing ZISCO for nearly six months (The Financial Gazette, 2006).
GSHL hired Alexander Tomov as CEO of Kremikovtzi in August 2008. A month later, Tomov was indicted of embezzlement involving a soccer club, CSKA Sofia (The Wall Street Journal, 2008). On Christmas 2008, Pramod Mittal sold CSKA Sofia to Bulgarian company Titan (Rediff, 2008).
The basic insight found: countries where GSHL investments are hosted eventually incurred huge losses in terms of unrealized investments because of mega-deals with personages later indicted with corporate or national crime! Remember these names: Olesegun Obasanjo, Gbenga Obasanjo, Liyel Imoke, Michael Aondoakaa, Seun Oyefeso, Alexander Tomov, among others.
In Leveraged Investments, it revealed that GSHL repeatedly borrowed money to fund its foreign acquisitions, then borrowed again to fund its operations. Aside from that, GSHL is wont to announce changing amounts of investments, yet using the host country’s financial institutions.
In acquiring Bulgaria’s Kremikovtzi, it initially borrowed $120 million to buy Finmetals’s stake; then another loan for $400 million, with lien on Kremikovtzi’s assets, to pay the first loan. Even GSHL’s flagship company, Ispat Industries Ltd. [IIL], is now practically controlled by a bank consortium (The Economic Times, 2009). IIL posted huge profits in 2005, but was 117% in red a year later and conveniently blamed it to a steel downturn. All these shift happened during GSHL’s watch.
Some of GSHL’s Balkan acquisitions floundered by default. The privatization deal with Ivangrad’s Rudnik Uglja Berane was declared void by Montenegro in June (Platts, 2007); while Serbia terminated its sale of Magnohrom to GSHL in December (2007). Llamkos Steel, the exemplary case of privatization in 2005, was sequestered by Kosovo and re-tendered in 2008 (Financial Times, 2009). Incidentally, RZB Vienna brokered a $35 million structured trade financing deal for Stemcor and GIKIL in March 2005 (Trade Finance, 2005), yet GSHL failed to invest the envisaged amount by February 2009 (also see above on GIKIL).
The Nigerian government disclosed that GSHL/GIHL owe Nigerian banks $192 million (Business Standard, 2008) with Delta Steel assets pledged. GSHL even tried this tactic in GSPI by applying with Philippine Export-Import Credit Agency for a sovereign guarantee of $20 million loan to acquire raw materials (Manila Standard Today, 2007). The Philippines denied the guarantee.
In Investigations and Litigations, GSHL effectively and advantageously used litigation, while itself being a subject of investigations. GSHL won Llamkos through litigation. It almost succeeded in winning Liberia’s mining rights through a Writ of Prohibition. With Nigeria’ cancellation of GSHL contracts, it immediately brought the ‘breach’ to the International Chamber of Commerce (LiveMint, 2008). To this day, Nigeria continues its investigation against GSHL alleged ‘asset striping’ in Ajaokuta Steel, the missing Iron Ore Concentrate at NIOMCO, and the use of GINL steel plants as collateral for loans made with Nigerian banks.
A short GSHL’s stint at ZISCO revealed that local and regional supply contracts were substituted with that of South African company Stemcor (The Financial Gazette, 2006). Recent reports, now dubbed as the «Ziscogate Scandal», shown that GSHL’s contract was awarded even without due diligence (Sokwanele, 2006).
GSHL even denied knowledge of India’s Serious Frauds Investigation Office [SFIO] probe against IIL within days after GSHL acquired NSC (Manila Standard Today, 17 February 2004).
In Enabling Platforms, GSHL constantly reminded its host country of ‘enabling platforms’: from construction of a 25-km Agbarbo-Warri port rail line, dredging of Warri River, the right to lift 160,000 barrels of oil, land allocation of 50,000 acres, supply of natural gas at subsidized rates and long-term iron ore mining rights in Nigeria (News Nigeria, 2007) to persistent announcement of commercial operations of facilities in the Philippines, although operating at less than 50% (Manila Bulletin, 2006), sought preferential power rates in Mindanao (Manila Standard, 2008), aside from the constant appeals to the Philippine President to change the import tariff rates!
The Show Me The Money! post, itemized the countries where GSHL is charged with management failure, including various complaints from employees for non-payment or delayed salaries in Nigeria, Libya, Bulgaria, Kosovo and the Philippines; ‘asset stripping’ in Delta and Ajaokuta, Nigeria; mounting debts in Nigeria, Bulgaria, Serbia and Kosovo.
Yesterday, a preview of corruption in countries where GSHL had sizable investments, was presented. Most of GSHL’s acquisitions were in countries, except Bulgaria, with which public perception as well as the instrumentalities of the country’s corruption were regular members of the world’s watch list on corruption and governance. Ironically, GSHL denied the consummation of the ZISCO deal citing massive corruption, while GSHL/GINL was under investigation for unabated ‘asset stripping’ or ‘asset borrowing’ in Nigeria, aside from being the subject itself to a Serious Frauds Investigation Office [SFIO] probe over alleged exposure to Rs 8,500 crore of public funds, erosion of net worth and high accumulated losses in 2004.
Unfortunately, there is a great disconnect between the dream and the reality. This writer do not claim to be a pundit, but from the looks of past events, it is unlikely that Pramod Mittal is really “beating industry expectation” but rather the steel industry’s expectation is beating Pramod Mittal.
Notes:
The Business Standard (2008). Nigerian shock for Global Infra, Kolkata: The Business Standard, 04 April 2008. back to text.
Cahiles-Magkilat, Bernie (2006). BoI to validate Global Steel exports. Manila: The Manila Bulletin, 07 June 2006 . back to text
Campbell, Keith (2006a). Indian steel company in $400m Zimbabwe steel deal. Creamer Media’s Engineering News, 14 April 2006. back to text
Chatterjee, Dev (2009). Ispat promoters pledge entire stake with lenders. New Delhi: The Economic Times, 01 June 2009. back to text.
Flores, Alena Mae S. (2004). Banks seek P10b bonds from NSC. Manila: The Manila Standard Today, 17 February 2004. back to text
Handique, Maitreyee (2008). Global Steel says Pramod Mittal is not avoiding the Indian govt. New Delhi: LiveMint, The Wall Street Journal, 05 April 2008. back to text
India Inc (2008). Pramod Mittal: Beating industry expectation. Resurgent India Inc, 2008. back to text
Leadership (2008). Gbenga Obasanjo Indicted. Naija Rules!, 02 June 2008. back to text
MacDonald, Neil (2009). Privatisation: Transfer of power sees legal tangles proliferate. Kosovo: Special Report. London: The Financial Times, 05 June 2009. p. 3. back to text
Mafunda, Kumbirai (2006). Hwange blamed for failed ZISCO deal, The Financial Gazette. The ZIMBABWE Situation, 15 September 2006. back to text.
Mbachu, Dulue (2008). Nigeria revokes sale of firms to Global Steel. New Delhi: LiveMint, The Wall Street Journal, 04 April 2008. back to text.
Nezavisne novine (2008). BiH: Global Ispat is the eligible buyer of KHK Lukavac. Kosovska, Beograd: Ekonomist Media, 19 May 2008. back to text
Odunlami, Tayo (2007). Privatisation Scams Of OBJ’s Era. Abuja: The News, 24 September 2007. back to text.
Platts (2007). Balkan Energy to buy Berane mine, Platts Energy in East Europe. Issue 121. Platts, McGraw Hill. 31 August 2007. p. 18. back to text
PressCut (2009). Still no solution for KHK and GIKIL. Limun.hr, 03 Febraury 2009. back to text
Ramos, Elaine Ruzul S. (2007). Global Steel investing $1.6b more, brushes off sale rumor. Manila: The Manila Standard Today, 12 December 2007. back to text
Ramos, Elaine Ruzul S. (2008). Global Steel seeks friendly policies, lower power rates. Manila: The Manila Standard Today, 21 July 2008. back to text
Rediff (2008). Pramod Mittal sells CSKA Sofia. Place: Rediff. PTI, 25 December 2008. back to text
Serbia, Government of (2007). Privatisation Agency breaks Magnohrom sale contract. Belgrade: New Balkan, 19 December 2007. back to text
Sokwanele – Zvakwana (2006). ZISCO: The cost of Zimbabwe’s kleptocracy. Zimbabwe Civic Action Support Group, 14 December 2006. back to text.
Trade Finance (2005). Reviving commodity flows in Bosnia, Trade Finance – Financial Intelligence for Global Trade. Euromoney Institutional Investor Plc., 15 March 2005. back to text
Walker, Marcus (2008). Bulgarian Steel Battle Heats Up. New York: The Wall Street Journal, Dow Jones & Company, 04 August 2008. p. A1. back to text.
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The Grey Chronicles
Understanding GSHL: Conclusion
Tags: Agbarbo-Warri Port Rail, Ajaokuta Steel, Alexander Tomov, Asset Striping, Balkans, Bulgaria, Cessation, Collateral, Commercial Operations, Corruption, Crore, CSKA Sofia, Delta Steel, Failure, Finmetals, Galvanizer, GIKIL, Global, Global Ispat Koksna Industrija Ltd, Global Steel Holdings Ltd., Global Steelworks Infrastructures, GSHL, GSII, IIL, Iligan City, Import, India, International Chamber of Commerce, Investigation, Investment, Iron Ore, Iron Ore Concentrate, Isle of Manx, Ispat Industries Ltd, Ivangrad, KHK Lukavac, Kosovo, Kremikovtzi, Liberia, Libya, Liquidation, Litigation, Liyel Imoke, Llamkos Steel, Lukavac Coke & Chemistry Multiplant, Magnohrom, Management, Mega Deals, Michael Aondoakaa, Mining Rights, National Steel Corporation, Natural Gas, Nigeria, NIOMCO, Non-payment, Oil, Olugbenga Obasanjo, Olusegun Obasanjo, Operations, Philippine Export-Import Credit Agency, Philippines, Pramod Mittal, Preferential Power Rates, Re-tender, Rudnik Uglja Berane, RZB Vienna, Sequester, Serbia, Serious Frauds Investigation Office, Seun Oyefeso, SFIO, Shutdown, SOLGAS Nigeria, Steel, Stemcor, Supply Contract, Tariff Rates, Umaru Yar’Adua, Warri River, Writ of Prohibition, Zimbabwe, Zimbabwe Iron and Steel Co., ZISCO, Ziscogate Scandal
Almost two weeks ago, The Grey Chronicles started these posts with a review of Pramod Mittal’s promise made at the inauguration of National Steel Corporation [NSC] in 04 February 2004. For the past week, this blog summarized the investment forays of Global Steel Holdings Ltd. [GSHL], headquartered in Dubai, from the Balkans, Bulgaria, Nigeria, Libya, India and Zimbabwe. The previous posts highlighted common insights to foreign investments behavior of GSHL, incorporated in 2005 in tax haven Isle of Manx. The obvious commonality is that almost all are mired with controversies. The Grey Chronicles also provided strikingly similar events in GSHL’s Philippine plant. Formerly known as National Steel Corporation, the plant, located in Iligan City, was privatized in 1995, declared a cessation of plant operations—shutdown—in 1999, liquidated in 2003, and officially re-opened as Global Steelworks Infrastructures, Inc. [GSII] in 2004.
In Mega-Deals, Crores Lost, GSHL increased its steel-producing capacity from being a mere India-based galvanizer in 1993 to become a global steel player in 2003. In 2008, India Inc (2008) stated that Pramod Mittal is “beating industry expectation”:
In 2003, GSHL partnered with Lukavac Coke & Chemistry Multiplant [KHK Lukavac] to form Bosnia’s Global Ispat Koksna Industrija Ltd [GIKIL]. Nezavisne novine (2008) wrote in May: GSHL was the favored buyer of GIKIL’s 16%, ultimately 51% of government’s stake in future sale. Presscut (2009) stated in February 2009 that GSHL has yet to invest BAM 46 million in GIKIL.
Next in line was a series of Nigerian contracts in 2004. Nigeria spent billions of dollars for its steel plants but snatched by GSHL for loose change through Dr. Olugbenga Obasanjo, son of incumbent President Olusegun Obasanjo (The News, 2007). The son was later indicted of N24-billion fraud (Leadership, 2008). Obasanjo’s successor, Umaru Yar’Adua, revoked the contracts on 01 April 2008 (LiveMint, 2008). Nigeria is also appealing the International Chamber of Commerce’s arbitration award of N399 billion to SOLGAS, Nigeria.
GSHL promised a US$400-million investment over 20 years for the rehabilitation of various Zimbabwe Iron and Steel Co. [ZISCO] facilities (The Engineering News, April 2006) but cancelled the same in 2006 after managing ZISCO for nearly six months (The Financial Gazette, 2006).
GSHL hired Alexander Tomov as CEO of Kremikovtzi in August 2008. A month later, Tomov was indicted of embezzlement involving a soccer club, CSKA Sofia (The Wall Street Journal, 2008). On Christmas 2008, Pramod Mittal sold CSKA Sofia to Bulgarian company Titan (Rediff, 2008).
The basic insight found: countries where GSHL investments are hosted eventually incurred huge losses in terms of unrealized investments because of mega-deals with personages later indicted with corporate or national crime! Remember these names: Olesegun Obasanjo, Gbenga Obasanjo, Liyel Imoke, Michael Aondoakaa, Seun Oyefeso, Alexander Tomov, among others.
In Leveraged Investments, it revealed that GSHL repeatedly borrowed money to fund its foreign acquisitions, then borrowed again to fund its operations. Aside from that, GSHL is wont to announce changing amounts of investments, yet using the host country’s financial institutions.
In acquiring Bulgaria’s Kremikovtzi, it initially borrowed $120 million to buy Finmetals’s stake; then another loan for $400 million, with lien on Kremikovtzi’s assets, to pay the first loan. Even GSHL’s flagship company, Ispat Industries Ltd. [IIL], is now practically controlled by a bank consortium (The Economic Times, 2009). IIL posted huge profits in 2005, but was 117% in red a year later and conveniently blamed it to a steel downturn. All these shift happened during GSHL’s watch.
Some of GSHL’s Balkan acquisitions floundered by default. The privatization deal with Ivangrad’s Rudnik Uglja Berane was declared void by Montenegro in June (Platts, 2007); while Serbia terminated its sale of Magnohrom to GSHL in December (2007). Llamkos Steel, the exemplary case of privatization in 2005, was sequestered by Kosovo and re-tendered in 2008 (Financial Times, 2009). Incidentally, RZB Vienna brokered a $35 million structured trade financing deal for Stemcor and GIKIL in March 2005 (Trade Finance, 2005), yet GSHL failed to invest the envisaged amount by February 2009 (also see above on GIKIL).
The Nigerian government disclosed that GSHL/GIHL owe Nigerian banks $192 million (Business Standard, 2008) with Delta Steel assets pledged. GSHL even tried this tactic in GSPI by applying with Philippine Export-Import Credit Agency for a sovereign guarantee of $20 million loan to acquire raw materials (Manila Standard Today, 2007). The Philippines denied the guarantee.
In Investigations and Litigations, GSHL effectively and advantageously used litigation, while itself being a subject of investigations. GSHL won Llamkos through litigation. It almost succeeded in winning Liberia’s mining rights through a Writ of Prohibition. With Nigeria’ cancellation of GSHL contracts, it immediately brought the ‘breach’ to the International Chamber of Commerce (LiveMint, 2008). To this day, Nigeria continues its investigation against GSHL alleged ‘asset striping’ in Ajaokuta Steel, the missing Iron Ore Concentrate at NIOMCO, and the use of GINL steel plants as collateral for loans made with Nigerian banks.
A short GSHL’s stint at ZISCO revealed that local and regional supply contracts were substituted with that of South African company Stemcor (The Financial Gazette, 2006). Recent reports, now dubbed as the «Ziscogate Scandal», shown that GSHL’s contract was awarded even without due diligence (Sokwanele, 2006).
GSHL even denied knowledge of India’s Serious Frauds Investigation Office [SFIO] probe against IIL within days after GSHL acquired NSC (Manila Standard Today, 17 February 2004).
In Enabling Platforms, GSHL constantly reminded its host country of ‘enabling platforms’: from construction of a 25-km Agbarbo-Warri port rail line, dredging of Warri River, the right to lift 160,000 barrels of oil, land allocation of 50,000 acres, supply of natural gas at subsidized rates and long-term iron ore mining rights in Nigeria (News Nigeria, 2007) to persistent announcement of commercial operations of facilities in the Philippines, although operating at less than 50% (Manila Bulletin, 2006), sought preferential power rates in Mindanao (Manila Standard, 2008), aside from the constant appeals to the Philippine President to change the import tariff rates!
The Show Me The Money! post, itemized the countries where GSHL is charged with management failure, including various complaints from employees for non-payment or delayed salaries in Nigeria, Libya, Bulgaria, Kosovo and the Philippines; ‘asset stripping’ in Delta and Ajaokuta, Nigeria; mounting debts in Nigeria, Bulgaria, Serbia and Kosovo.
Yesterday, a preview of corruption in countries where GSHL had sizable investments, was presented. Most of GSHL’s acquisitions were in countries, except Bulgaria, with which public perception as well as the instrumentalities of the country’s corruption were regular members of the world’s watch list on corruption and governance. Ironically, GSHL denied the consummation of the ZISCO deal citing massive corruption, while GSHL/GINL was under investigation for unabated ‘asset stripping’ or ‘asset borrowing’ in Nigeria, aside from being the subject itself to a Serious Frauds Investigation Office [SFIO] probe over alleged exposure to Rs 8,500 crore of public funds, erosion of net worth and high accumulated losses in 2004.
Unfortunately, there is a great disconnect between the dream and the reality. This writer do not claim to be a pundit, but from the looks of past events, it is unlikely that Pramod Mittal is really “beating industry expectation” but rather the steel industry’s expectation is beating Pramod Mittal.
Notes:
The Business Standard (2008). Nigerian shock for Global Infra, Kolkata: The Business Standard, 04 April 2008. back to text.
Cahiles-Magkilat, Bernie (2006). BoI to validate Global Steel exports. Manila: The Manila Bulletin, 07 June 2006 . back to text
Campbell, Keith (2006a). Indian steel company in $400m Zimbabwe steel deal. Creamer Media’s Engineering News, 14 April 2006. back to text
Chatterjee, Dev (2009). Ispat promoters pledge entire stake with lenders. New Delhi: The Economic Times, 01 June 2009. back to text.
Flores, Alena Mae S. (2004). Banks seek P10b bonds from NSC. Manila: The Manila Standard Today, 17 February 2004. back to text
Handique, Maitreyee (2008). Global Steel says Pramod Mittal is not avoiding the Indian govt. New Delhi: LiveMint, The Wall Street Journal, 05 April 2008. back to text
India Inc (2008). Pramod Mittal: Beating industry expectation. Resurgent India Inc, 2008. back to text
Leadership (2008). Gbenga Obasanjo Indicted. Naija Rules!, 02 June 2008. back to text
MacDonald, Neil (2009). Privatisation: Transfer of power sees legal tangles proliferate. Kosovo: Special Report. London: The Financial Times, 05 June 2009. p. 3. back to text
Mafunda, Kumbirai (2006). Hwange blamed for failed ZISCO deal, The Financial Gazette. The ZIMBABWE Situation, 15 September 2006. back to text.
Mbachu, Dulue (2008). Nigeria revokes sale of firms to Global Steel. New Delhi: LiveMint, The Wall Street Journal, 04 April 2008. back to text.
Nezavisne novine (2008). BiH: Global Ispat is the eligible buyer of KHK Lukavac. Kosovska, Beograd: Ekonomist Media, 19 May 2008. back to text
Odunlami, Tayo (2007). Privatisation Scams Of OBJ’s Era. Abuja: The News, 24 September 2007. back to text.
Platts (2007). Balkan Energy to buy Berane mine, Platts Energy in East Europe. Issue 121. Platts, McGraw Hill. 31 August 2007. p. 18. back to text
PressCut (2009). Still no solution for KHK and GIKIL. Limun.hr, 03 Febraury 2009. back to text
Ramos, Elaine Ruzul S. (2007). Global Steel investing $1.6b more, brushes off sale rumor. Manila: The Manila Standard Today, 12 December 2007. back to text
Ramos, Elaine Ruzul S. (2008). Global Steel seeks friendly policies, lower power rates. Manila: The Manila Standard Today, 21 July 2008. back to text
Rediff (2008). Pramod Mittal sells CSKA Sofia. Place: Rediff. PTI, 25 December 2008. back to text
Serbia, Government of (2007). Privatisation Agency breaks Magnohrom sale contract. Belgrade: New Balkan, 19 December 2007. back to text
Sokwanele – Zvakwana (2006). ZISCO: The cost of Zimbabwe’s kleptocracy. Zimbabwe Civic Action Support Group, 14 December 2006. back to text.
Trade Finance (2005). Reviving commodity flows in Bosnia, Trade Finance – Financial Intelligence for Global Trade. Euromoney Institutional Investor Plc., 15 March 2005. back to text
Walker, Marcus (2008). Bulgarian Steel Battle Heats Up. New York: The Wall Street Journal, Dow Jones & Company, 04 August 2008. p. A1. back to text.
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