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Sanjeev Gupta is in talks with Glencore to refinance the debt of its European aluminum business, a deal that would allow the metals tycoon to maintain control of one of its best assets.
Gupta’s GFG alliance, which employs 35,000 people from the UK to Australia, has been fighting restructure and refinance its debt after the collapse of Greensill Capital, its main lender.
Greensill and his debt investors had $ 5 billion exposure in GFG when the supply chain financing group exploded in March. GFG is too under investigation in the UK for alleged fraud, which complicates efforts to find new funding. GFG has said it will cooperate with the probe.
Glencore is in talks to refinance more than $ 500 million in debt to Alvance, Gupta’s aluminum business with assets in France and Belgium, according to two people familiar with the matter.
An agreement with the London-based commodity and commodity trader would allow Gupta to remain the owner, in contrast to a previous proposal by private equity firm American Industrial Partners (AIP), which sought to buy the asset.
An agreement would be an advantage for Glencore’s aluminum business if it is able to secure the supply of the metal, giving the FTSE 100 company a pipeline it could sell through its broad commercial sector.
The Glencore measure comes as aluminum prices have risen nearly 25% this year to more than $ 2,500 a tonne as the world economy begins to rebound from the pandemic. Light metal is used in everything from beverage cans to cars.
The jewel in Alvance’s crown is its Dunkirk smelter, the largest in Europe. Liberty acquired the Rio Tinto plant at 280,000 tons per year in 2018 for $ 500 million. GFG estimated that Alvance had a business value north of $ 1 billion, based on projected earnings of more than $ 150 million by 2021, according to a March GFG document.
Glencore’s aluminum unit, which already buys the metal from Liberty, is headed by Robin Scheiner. Bankers say he is willing to expand the business and has been looking for possible deals. This year he met with Gupta in Zurich, where they brainstormed, although they did not reach an agreement, according to people who knew the subject.
Glencore declined to comment. GFG said it “continues to focus on restructuring and refinancing its businesses after the collapse of Greensill Capital. Alvance’s portfolio is performing well, supported by strong market conditions.”
An agreement with Glencore would repay several debt facilities throughout Alvance’s business. The Dunkirk aluminum smelter has a $ 260 million loan, while the Alvance rolling mill in Duffel has debts of $ 59 million more. The business also has a $ 131 million riskier BlackRock debt and a $ 73 million investment Greensill funding.
A group of banks originally provided the loan in Dunkirk, alongside Glencore’s rival, Trafigura. The Geneva-based commodity trader still holds that debt, while banks sold their position primarily to AIP this year, when the New York-based private equity firm tried to snatch control of the asset.
Trafigura also signed an aluminum deal with Gupta when it originally provided Dunkirk debt in late 2018. Alvance has another $ 114 million in liabilities arising from disputes with the original sellers of the assets of Dunkirk and Duffel.
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