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GFG files claim against AIP 'expropriation' of French aluminum smelter

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GFG files claim against AIP 'expropriation' of French aluminum smelter

Highlights

Dunkerque smelter is Europe's biggest

GFG 'confident' it will regain smelter control

GFG Alliance has filed action in the English High Court against the purported takeover by US-based private equity group American Industrial Partners of the Aluminium Dunkerque primary aluminum smelter, part of GFG's Alvance Aluminium subsidiary, GFG Alliance said in an emailed statement Oct. 18.

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"GFG is confident that it will restore control of this important asset to the Alvance group," a GFG Alliance spokesperson said in the statement. "GFG Alliance has now issued a claim against the relevant AIP-controlled companies in the English High Court for orders declaring that their actions were invalid and ineffective."

AIP stated Oct. 1 that through a wholly owned subsidiary it had acquired ownership of the Aluminium Dunkerque smelter, Europe's biggest, with 285,000 mt/year primary metal capacity. The acquisition was completed through the foreclosure on the shares of Liberty France Industries 1, which were pledged to affiliates of AIP under mezzanine financing arrangements previously provided to Aluminium Dunkerque, due to ongoing payment and other defaults, it said.

AIP currently has more than $7 billion of assets under management on behalf of leading pension, endowment and financial institutions.

The action now launched by GFG Alliance is understood to be against Lightship Capital II, which is controlled by AIP.

"GFG's opinion is that AIP has unlawfully expropriated the valuable aluminium smelter, located in Dunkerque, France, belonging to GFG's Alvance Aluminium business," a GFG Alliance spokesperson said. "Despite GFG providing funds to pay all liabilities owed to AIP under a financing agreement, as well as arranging offers from third party funders to refinance or purchase all relevant obligations to AIP in full, AIP nevertheless purported to exercise security rights to take control of the operating companies. We made clear that we would pursue legal action if necessary to recover the asset."

When contacted by S&P Global Platts, AIP representatives had no comment Oct. 18 on GFG Alliance's statement on the filing of court action.

Production is understood to be continuing as normal at the smelter.

Alvance acquired the Dunkerque smelter from Rio Tinto in 2018 for around $500 million. Alvance also has a smelter at Alvance British Aluminium in Lochaber, Scotland, and downstream products producer Alvance Aluminium Duffel in Belgium, purchased from Novelis in 2019. The group puts its total aluminum products production capacity at nearly 600,000 mt/year currently.

Sources close to the matter maintain the Lochaber smelter is not expected to be the subject of any takeover battle due to a sounder financial base.

Some GFG Alliance companies suffered a cash squeeze following the collapse of the group's main financier, Greensill Capital, in March. However, the aluminum assets were reportedly performing well because of strong market conditions.

LME cash primary aluminum prices were quoted at $2,896/mt Oct. 18, down 0.90% on the day.

Aluminum prices recently hit 13-year highs on lower production by China, coupled with high demand.