On 5th September 2021, Sanjeev Gupta chaired GFG Alliance confirmed that it will initiate legal action against any attempts by the US private equity fund, AIP, to seize the power of the Dunkirk aluminium smelter which is part of GFG’s ALVANCE aluminium business.
AIP bought out a chunk of the ALVANCE debts from its previous lenders earlier in 2021. The initial discussions also took place between GFG and AIP regarding a potential future sale of these assets but these discussions were briskly concluded by GFG due to précised concerns over the negotiations, and the gross under-market valuation AIP put on the business.
GFG announced a fully commercial arrangement between ALVANCE and a leading international metal market business, at the concurrent of concluding negotiations with AIP in July 2021. As part of this agreement, the international partner agreed to repay AIP in full and provide additional support for the ALVANCE business.
Despite this development and approaches by GFG to repay AIP the debt it held, AIP took further aggressive action to acquire Dunkirk’s mezzanine debt in the secondary debt market. GFG believes this was all part of a premeditated plan to accelerate the debt payment to immediately enforce its debt to acquire the assets on the cheap through an aggressive loan-to-own practice common in so-called “vulture” funds. This was despite the fact the funds to repay AIP had been made available since July 2021
For reasons which are now clear AIP has continued to refuse to accept repayment, third party debt purchases or third party refinancing to artificially manufacture enforcement of its debt and seize the assets to try to obtain them at a substantial discount to their market value.
Given GFG’s efforts to repay, repurchase or refinance the debt, AIP’s stated position that GFG is in default is incorrect. GFG will take all necessary legal measures to unwind AIP’s actions.
GFG acquired the Dunkirk aluminium smelter in 2018 and integrated the business into ALVANCE creating a leading European integrated aluminium business. Since acquisition GFG has invested over $100 million in the development of the business, protecting nearly 1,000 jobs, and increasing EBIDTA threefold.
Commenting on GFG’s position, GFG Executive Chairman Sanjeev Gupta said, “AIP has resisted all efforts by GFG to make full repayment of its debt, yet they claim GFG is in default. This is a cynical and predatory effort to try to acquire our business on the cheap. We will fight this with all of our efforts to ensure Dunkirk remains inside our international steel and aluminium group and can execute our long-term strategy, to the benefit of all of its stakeholders. Our employees, customers and suppliers deserve better and bolstered by our commercial deal with a market-leading partner we remain committed to the reindustrialisation of France.”
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