Sanjeev Gupta is negotiating with Glencore on debt refinancing of its European aluminum business, a transaction that will allow the metal giant to retain control of one of his best assets.

Gupta’s GFG alliance employs 35,000 people from the UK to Australia and has been striving for Reorganization And it refinanced its debt after the collapse of its main lender, Greensill Capital.

Greensill and its debt investors USD 5 billion risk exposure When the supply chain finance group imploded in March, it went to GFG. GFG too Under investigation Suspected fraud in the UK has complicated efforts to find new financing. GFG said it would cooperate with the investigation.

According to two people familiar with the matter, Glencore is discussing the refinancing of Alvance’s more than $500 million in debt, Alvance is Gupta’s aluminum company with assets in France and Belgium.

The agreement with the London-listed mining company and commodities trader will allow Gupta to remain the owner, in stark contrast to an earlier proposal by American private equity firm American Industrial Partners (AIP), which wanted to purchase the asset.

If Glencore can ensure the supply of metals, this transaction will be a boon for Glencore’s aluminum business, providing FTSE 100 index companies with a channel through which they can sell through their large trading department.

Glencore’s move comes as the global economy begins to rebound from the pandemic, and aluminum prices have soared by nearly 25% this year to more than US$2,500 per ton. This lightweight metal is used in everything from beverage cans to cars.

The jewel in Alvans’ crown is the largest Dunkirk smelter in Europe. Liberty acquired the 280,000-ton factory from Rio Tinto in 2018 for US$500 million. According to a GFG March document, GFG estimates that the enterprise value of Alvance exceeds US$1 billion based on expected earnings of more than US$150 million in 2022.

Glencore’s aluminum division has purchased metal from Liberty, which is operated by Robin Scheiner. The banker stated that he is keen to expand his business and is always looking for potential transactions. According to people familiar with the matter, he met with Gupta in Zurich this year, where they brainstormed but no agreement was reached.

Glencore declined to comment. GFG stated that it “continues to focus on the restructuring and refinancing of its business after the collapse of Greensill Capital. Supported by strong market conditions, the Alvance portfolio has performed well.”

The Glencore transaction will repay multiple debt financing for the entire Alvance business. The Dunkirk aluminum smelter has a loan of US$260 million, and Alvance’s steel mill in Duffel has a debt of US$59 million.The business also has US$131 million in debt from BlackRock’s higher risk holding company, and US$73 million in Financing from Greensill.

A group of banks initially provided loans in Dunkirk with Trafigura, a competitor of Glencore. The Geneva-based commodity trader still holds the debt, and this year, when the New York-based private equity firm tried to seize control of the asset, the bank mostly sold its position to AIP.

Trafigura also signed an aluminum agreement with Gupta when initially providing Dunkirk debt at the end of 2018. Alvance also has $114 million in debt from dispute With the original seller of Dunkirk and Duffel assets.

Source link