Sanjeev Gupta’s Grip Over Dunkirk Smelter at Risk as BNP Seeks Loan Sale
(Bloomberg) -- BNP Paribas SA is seeking to sell its stake in a loan to GFG Alliance’s Dunkirk unit, a sale that could loosen Sanjeev Gupta’s grip over a key asset as other lenders consider seizing control of the aluminum smelter.
The bank is offloading its $20 million portion of the loan raised by Gupta in 2018, according to people familiar with the matter who asked not to be identified discussing private information. Although a small amount, the sale could pave the way to actions by other lenders, led by Trafigura Group, to threaten Gupta’s control over the smelter.
The French bank was one of the lenders reluctant to take GFG’s Liberty Industries France to court over $350 million in loans that the smelter has long been in breach of. BNP’s sale could remove an obstacle to more aggressive action by other lenders to enforce the terms of the loan.
In recent weeks, other banks including Morgan Stanley, Natixis SA, Industrial & Commercial Bank of China Ltd. and ICBC Standard Bank Plc, have sold or have sought to sell their loans to the Dunkirk smelter at discount as GFG fights for survival after the collapse of its biggest backer, Greensill Capital. Distressed debt investors that bought into the loans -- including Davidson Kempner Capital Management and Triton Partners -- could join Trafigura in efforts to take control, the people said.
Representatives for BNP, Davidson Kempner, Natixis, Trafigura and Triton declined to comment. Morgan Stanley, ICBC and ICBC Standard Bank loan sale plans have been previously reported.
“The smelter is strongly cashflow positive and is enjoying some of the best market conditions the industry has seen in the last ten years,” a spokesperson for GFG wrote in an emailed statement. “Its Ebitda projections for this year and next more than adequately cover its debts.”
Liberty Industries France was one of the few GFG units that had managed to raise financing from a group of international banks as it sought financing to acquire the smelter from Rio Tinto Group. While it hasn’t missed payments, it has been in breach of loan covenants on disclosure and related-party transactions, according to group accounts and people familiar with the matter.
It has been in negotiations with the French government for a Covid-relief loan since last year. The talks were halted in March amid the Greensill collapse, a Finance Ministry official said.
GFG Alliance, a loose group of metals and commodity trading companies owned by Gupta and his family, has been struggling to replace $5 billion of credit lines it had with Greensill. It has been seeking to raise new financing for the businesses while fending off attempts by Credit Suisse Group AG, which bought GFG loans from Greensill, to push units in the U.K. and Australia into insolvency.
Last week, three separate French GFG units entered “conciliation” proceedings to stave off the risk of insolvency and reach an agreement with creditors.
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