Gupta’s Key Smelter at Risk as Private Equity Seizes Shares
(Bloomberg) -- Private equity firm American Industrial Partners said it took ownership of an aluminum smelter in Dunkirk, France, a key asset owned by Sanjeev Gupta’s GFG Alliance.
The U.S.-based fund said it foreclosed on shares of the unit that owns the plant, Liberty France Industries I SA, after the company defaulted on a mezzanine loan financing arrangement, according to a statement on Friday. A spokesperson for GFG said the company will defend its position and will continue operating the Dunkirk site.
The loss of the smelter -- Europe’s largest aluminum plant -- could be a huge blow to Gupta as he struggles to keep his empire together. With aluminum prices near the highest in over a decade, the asset should be providing much needed cash for his other units. The smelter is at the core of his metal group, and has been at the center of a battle for its control since GFG’s largest lender Greensill Capital collapsed in March.
The French government said AIP taking ownership makes a positive outcome possible for the company and its workers, but officials would continue to closely follow the situation in the coming days as the site is of strategic importance for the country. The state has commitments from AIP to maintain industrial capacity and sensitive activities in France, Finance Minister Bruno Le Maire and industry minister Agnes Pannier-Runacher said in a statement.
In April, AIP bought most of the senior debt of Gupta’s aluminum plants in Dunkirk and Duffel, Belgium and later made a bid to buy them. But the move angered Gupta as the bid was relatively low and also would have seen one of Gupta’s top lieutenants join AIP, Bloomberg previously reported.
Gupta instead reached a financing deal with Glencore Plc in July to replace most of its existing debt, seeking to prevent AIP taking over. The private equity fund put the units’ holding companies into administration in the same month.
“We note the action which has been taken in Luxembourg today and will be vigorously defending our position,” a spokesperson for GFG said.
“GFG has offered to repay AIP debt through a committed third party refinancing,” the spokesperson added. “AIP has instead used its loan to own model to orchestrate an asset take over for what is well below market value.”
A spokesperson for Glencore declined to comment.
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