Sanjeev Gupta is in talks with Glencore to refinance the debt into its European aluminum business, an agreement that will allow the metals magnate 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 for restructure and refinance its debt following the collapse of Greensill Capital, its main lender.
Greensill and his debt investors had it $ 5bn of exposure to GFG when the supply chain finance group imploded in March. GFG is too under investigation in the UK on suspicion of fraud, complicating efforts to find new funding. GFG said it will cooperate with the probe.
Glencore is in discussions to refinance more than $ 500m of debt in Alvance, Gupta’s aluminum business with assets in France and Belgium, according to two people who know the matter.
An agreement with the London-listed miner and commodity trader would allow Gupta to remain as the owner, contrary to a previous proposal by the US private company US Industrial Partners (AIP), which sought to buy the asset.
An agreement would be an advantage for Glencore’s aluminum companies if it is able to secure the supply of the metal, giving the FTSE 100 company a pipeline that it could sell with its vast trading arm.
Glencore’s move comes as aluminum prices have risen nearly 25 percent this year to over $ 2,500 a tonne as the global economy begins to recover from the pandemic. Light metal is used throughout, from beverage cans to carts.
The jewel in Alvance’s crown is his Dunkirk foundry, the largest in Europe. Liberty acquired the plant 280,000 tons per year from Rio Tinto in 2018 for $ 500 million. GFG has estimated that Alvance has a firm value north of $ 1bn, based on projected gains of more than $ 150m by 2021, according to a March GFG document.
The aluminum unit at Glencore, which already buys the metal from Liberty, is managed by Robin Scheiner. Bankers say it is important to expand the business and look for potential deals. He met with Gupta in Zurich this year where they brainstormed a series of ideas, even though they had not reached an agreement, according to people familiar with the matter.
Glencore declined to comment. GFG said it “continues to focus on restructuring and refinancing its activities following the collapse of Greensill Capital. The Alvance portfolio is performing well, supported by strong market conditions.”
An agreement with Glencore will repay several debt facilities in Alvance’s business. The Dunkirk aluminum smelter has a loan of $ 260 million, while the Alvance laminate in Duffel has a debt of more than $ 59 million. The company also has $ 131m in riskier debt than its BlackRock holding company, and $ 73m in funding from Greensill.
A group of banks originally provided the loan to Dunkirk, alongside Glencore’s rival, Trafigura. The Geneva-based commodity trader still holds this debt, while banks have sold most of their positions to AIP this year, when the New York-based private company sought to snatch control of the assets.
Trafigura also signed an aluminum deal with Gupta when it originally provided Dunkirk debt at the end of 2018. Alvance has an additional liability of $ 114 million arising from disputes with the original sellers of the Dunkirk and Duffel axes.