Spanish Govt. seeks solvency prove from a division of GFG Alliance before acquisition of San Ciprian Aluminium smelter

Metal tycoon Sanjeev Gupta has crowned a reputation for over a decade as one of the world’s biggest promoter of steel by sealing deals for mills and smelters across Australia to Romania while placing up billions in debt for decaying assets.

The Executive Chairman of GFG Alliance has planned out a vision of a greener future for steel, with his network of companies – GFG Alliance – leading the way. However, the almost bankruptcy of his biggest lender, Greensill Capital, has immediately throttled off a key source of funding and is threatening that pace of breakneck expansion.

As per our industry sources, the Spanish government has demanded from a division of Gupta’s GFG to prove its solvency before the company will be permitted to push ahead with a takeover of San Ciprian Aluminium smelter, post the information prompted by concerns over the impact of the unravelling of Lex Greensill’s trade-finance firm.

Athene Holding Ltd, which is engaged in buying assets tied to Greensill, has kept out Sanjeev Gupta-linked assets from the deal discussions.

Wyelands Bank, a lender owned by Gupta’s alliance has also thrown signs of stress. The Bank of England ordered Sanjeev Gupta to inject £75mn into the business to return retail deposits after news of Greensill’s troubles, prompted by concerns about Wyelands’ business model and its links to other Gupta companies. Greensill’s ties to Gupta have emerged as the focus of a probe at Germany’s financial regulator BaFin.

Greensill’s companies have played an instrumental role in funding the acquisitions that built Gupta’s empire. Now, scouting replacement financing will be critical to his businesses, which employ 35,000 people in 30 countries. The group’s operations churned out 5 million tonnes of steel in 2019 and have the capacity to make more than 300,000 tonnes of aluminium per year for auto manufacturers, packaging producers, aerospace clients, and more.

A GFG Alliance spokesperson said it was effectively business as usual for the company in Australia, and the GFG Alliance would be looking to identify new providers of funding.

“Our operations are running as normal and our core businesses continue to benefit from strong market conditions generating robust sales and cash flows,” the GFG Alliance spokesperson said.

“Our operational efficiency programme has improved profitability and we are making progress in our discussions with financial institutions that can help diversify our funding.  We are keeping our employees up to date and will provide further updates as we deliver our plans.”

In February 2021, GFG Alliance self-assured to close an agreement to buy Europe’s second-biggest aluminium smelter, a massive facility on Spain’s northern coast owned by Alcoa Corp and Gupta was working on what would have been his most audacious acquisition ever.

France encompassed in facilitating Gupta’s 2018 acquisition of Europe’s largest aluminium smelter, in the northern city of Dunkerque, from Rio Tinto Plc. and a hydroelectric station and aluminium smelter in Fort William, Scotland, that Gupta bought in 2016 for £330mn is backed by a 25-year-financial guarantee from the Scottish government.