Rio Tinto filed an arbitration case against GFG Alliance Ltd.'s Liberty House Ltd. over US$50 million in unsettled final payments related to the US$500 million sale of the Dunkerque aluminum smelter in France, London's Financial Times reported Sept. 1 citing sources familiar with the matter and a Rio Tinto statement.
The legal action stems from Liberty House's non-payment of customary post-closure adjustments, including working capital, that was agreed by both companies at the time of the sale, Rio Tinto said.
A Liberty House spokesman told the newspaper that the process to settle the amount is still ongoing, but did not comment on Rio Tinto's arbitration. The deal was expected to close in November 2018.
Lenders who funded a five-year, US$350 million loan to help finance the acquisition have also expressed concern as Liberty House has missed financial targets at Dunkerque that it had projected when seeking their financial backing for the deal, sources told Financial Times, adding that one of the banks has sold off its share of debt.
The sources also said Liberty House was not complying with several lesser terms of the loan, with Trafigura Group Pte. Ltd., part of the lending group, reportedly considering legal action earlier this year.
The Liberty House spokesman said the smelter is operating on budget and meeting its operational targets amid falling aluminum prices, adding that the company did not breach any financial covenants, according to the FT.
