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. Gupta is the founder of Liberty Steel and its holding company, GFG Alliance. The latter has vowed to fight the legal petition, which presents a fresh threat to Gupta’s metals empire and the 5,000 people it employs across the UK. The bank Credit Suisse is understood to have instructed administrators to file wind-up orders against Liberty Commodities Limited at a London insolvency court. The action was brought by a unit of another bank, Citigroup, which was acting under instruction from Credit Suisse. 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. GFG Alliance relied heavily on loans from the supply chain finance firm Greensill Capital, which was declared insolvent this month. GFG owed Greensill a reported £3.6bn before it collapsed, but has suspended repayment on those loans. Gupta is attempting to negotiate a “standstill” agreement with Greensill’s creditors, which would allow his business to raise alternative financing. 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. The system relied on insurance contracts that guaranteed investors would be paid, even if the companies, like Liberty, which borrowed money from Greensill, defaulted on repayments. 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. In Germany, a subsidiary of Greensill is facing criminal prosecution by the financial regulator, which has raised concerns about balance sheet manipulation. Greensill denies all wrongdoing. Credit Suisse has now shut down its Greensill-linked investment funds, worth nearly $10bn (£7.2bn), and has been furiously trying to recoup funds for its investors, handing back over $3.1bn so far. The bank has warned that it will probably take a financial hit from Greensill’s collapse. It has managed to recover about $50m through Greensill’s administrators, Grant Thornton, linked to a $140m bridging loan it handed to Greensill last year. The bank’s wind-up order aimed at Liberty Commodities is understood to be part of its latest efforts to recover funds, including for the fund investors. Filings for the UK-registered company show it has a charge over its assets from one creditor, Greensill Capital (UK) Limited. 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”. “While this takes place, we will vigorously defend any legal action on the grounds that we have a three-year committed facility with Greensill. 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,” GFG added. GFG is understood to have hired Alvarez & Marsal and PJT Partners to advise on efforts to identify new sources of funding to replace the Greensill loans. 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. Liberty Steel said on Monday that it planned to restart steelmaking next week, having paused production at some UK plants, including Rotherham, since 12 March. “Most of GFG Alliance’s businesses across its global portfolio are performing well and generating positive cashflow, supported by the operational improvements we’ve made and strong steel, aluminium and iron ore markets,” a GFG spokesperson said. Both Credit Suisse and Citigroup declined to comment.