LONDON, March 18 (Reuters) – Sanjeev Gupta’s GFG alliance secured a mortgage from Trafigura in 2018 by coming into right into a six-year deal to promote aluminum to the commodity dealer at beneath market costs, two sources with direct data of the deal instructed Reuters. .
The mortgage was used to assist finance the December 2018 buy of Europe’s largest aluminum smelter in Dunkirk, France, by GFG’s Liberty Home, the 2 sources mentioned.
They mentioned the deal, which had not been made public earlier than, means that the Dunkirk plant is much less uncovered to the broader financing points that GFG Alliance faces as a result of, not like different elements of the conglomerate , it had funding apart from Greensill Capital, which filed for insolvency final week.
A 3rd supply aware of the matter mentioned that the Dunkirk plant, whose aluminum manufacturing is essential for the automotive, aerospace and packaging industries in continental Europe, generates money and isn’t depending on no Greensill for funding.
Business sources mentioned GFG was counting for short-term funding on Greensill, but in addition used longer-term cash loans to purchase metal and aluminum vegetation, together with its Dunkirk plant.
GFG mentioned it could not “touch upon the particular phrases of our commerce agreements.” Trafigura declined to remark.
Gupta mentioned GFG is in talks with trustees over a so-called standstill settlement, which suggests it may droop debt funds to Greensill for an agreed interval.
GFG, an umbrella firm in Gupta’s community of metal, aluminum and vitality corporations, instructed unions final week that it had satisfactory funding to satisfy its present wants, however was searching for long-term alternate options.
The deal to promote aluminum to Trafigura at a diminished value, signed in November 2018, in response to a duplicate of the contract seen by Reuters, prompted participation within the financing of Dunkirk as a result of it supplied the commodity dealer with further earnings on high of that. pursuits. obtained via the mortgage, the 2 sources mentioned.
GFG purchased aluminum at market costs, which it offered to Trafigura at a reduction of $ 20 per tonne.
A consortium together with banks loaned GFG a complete of $ 350 million to purchase the Dunkirk smelter, a presentation doc ready for lenders and seen by Reuters. Trafigura pledged $ 150 million of that quantity, mentioned one of many first two sources, who spoke on situation of anonymity.
Gupta contributed the rest of the asking value of $ 500 million for the Dunkirk foundry, this presentation doc exhibits.
A fourth supply mentioned GFG had repaid a part of the mortgage from Trafigura and the banks and the quantity excellent was $ 250 million. The Dunkirk aluminum deal was used as collateral towards the mortgage, the supply added.
Trafigura has agreed to purchase as much as 560,000 tonnes of aluminum from GFG between 2019 and 2024, a minimal of 93,000 tonnes per yr, the contract seen by Reuters mentioned. At present exchange-traded costs, 560,000 tonnes are valued at $ 1.2 billion.
This doc additionally exhibits that the primary 460,000 tonnes could be offered to Trafigura at a reduction of $ 20 per tonne, revealing the extra quantity GFG was keen to pay to safe the commodity dealer’s financing.
(Reporting by Clara Denina and Pratima Desai; Modifying by Veronica Brown and Alexander Smith)