Rio Tinto still waiting for Sanjeev Gupta to pay $64m owed from Dunkirk smelter sale

Rio Tinto is still waiting for Sanjeev Gupta to pay the $64m he owes on the sale of Europe’s biggest aluminium smelter.

The Dunkirk aluminium smelter in northern France was bought by GFG Alliance in 2018.

Sanjeev Gupta still owes Rio Tinto $US50m ($64m) after failing to make final payments for Europe’s biggest aluminium smelter in Dunkirk, and more than 18 months after the mining giant began arbitration proceedings to claw back the cash.

Mr Gupta’s talks with Rio over the $US50m debt - the outstanding payment on the Dunkirk aluminium smelter he bought for $US500m in 2018 - remain ongoing.

This is despite Rio commencing arbitration proceedings against Mr Gupta in September 2019 which have yet to be resolved.

Mr Gupta’s GFG Alliance unit Alvance said it was still working through completing the deal.

“As is usual practice in sizeable mergers and acquisitions, there is a mechanism in place post-completion of this deal to settle the final consideration to be paid to the vendor net of working capital, accounting and other issues. This system is ongoing with the vendor as part of the normal process,” Alvance said in a statement.

“GFG’s deal to buy the Dunkirk smelter was a successful transaction. The Dunkirk plant is running at full capacity, is delivering to our customers and the outlook for its future remains very positive.”

The industrialists’s GFG continues to negotiate a standstill agreement with Greensill’s administrators on $US5bn of debt he owes the financier, which collapsed into insolvency last month.

Executive chairman of the GFG Alliance Sanjeev Gupta. Picture: John Feder

He is also fighting winding-up proceedings from Citibank and Credit Suisse on swathes of his assets, including South Australia’s Whyalla steelworks.

Just four weeks ago Mr Gupta was continuing to talk about Dunkirk, labelling the purchase as his first foray into traditional finance and the beginning of his diversification from Greensill.

But in a podcast sent to GFG employees last month, Mr Gupta said his aluminium business wasn’t completely weaned off Greensill, revealing a messy web of financing arrangements within his steel and metals empire.

“In aluminium, it’s largely not financed by Greensill. We have a term loan with a consortium of over 10 banks, international banks,” Mr Gupta said.

“For example in Dunkirk, we have other funding arrangements. In energy most of the funding is not from Greensill, so there are parts of the business not funded by Greensill and our intention was that our steel business, which is largely funded by Greensill, to move that away as well.

“That’s what we have to do. That’s our challenge and that is our goal.”

Mr Gupta is now scrambling to refinance what he owes Greensill, but the fact that he still owes Rio $US50m after beginning arbitration in September 2019, does not appear to reflect well on his empire’s financial health.

According to documents sighted by news agency Reuters, GFG not only secured financing from traditional lenders to acquire Dunkirk, it has tapped Greensill and US asset manager BlackRock.

Reuters reported that the funding that GFG Alliance got from Greensill for the French smelter was in the form of a $US77.5m promissory note, while BlackRock lent $US115m.

But a year later, Rio still hadn’t received all its cash and began arbitration proceedings.

“Rio Tinto confirms it has triggered an arbitration process in relation to the sale of the Dunkerque aluminium smelter, France, to Liberty House,” the mining giant said in a statement at the time.

“The arbitration relates to non-payment of customary post-closure adjustments, including working capital, which was agreed by both parties in the sale and purchase agreement.”

Sources said on Thursday that talks remain ongoing.

The Australian Securities and Investments Commission has confirmed it is looking into GFG’s Australian operations as part of its investigation into the fallout of Greensill’s collapse.

Mr Gupta has struggled to contain the fallout after Greensill sank into administration with Credit Suisse seeking to liquidate several of its steel and commodity businesses in Australia and the UK including Whyalla.

He has blasted the tactics of Greensill creditors as “dangerous and cavalier”, threatening thousands of jobs in his global empire, and that he will fight claims. He said the demands of creditors are crunching its ambitions to achieve a turnaround.

“I am concerned that short-term, aggressive tactics by some of Greensill’s creditors are threatening tens of thousands of long-term jobs here in the UK and elsewhere,” Mr Gupta wrote in The Times three weeks ago.

“These creditors are at risk of destroying their own chance of recouping value by taking these knee-jerk actions. They undermine profitable businesses and ultimately put at risk thousands of skilled, industrial jobs in communities with limited alternative employment opportunities.”

Credit Suisse had $10bn of funds invested in loans arranged by Greensill which included debts packaged up by businesses run by Mr Gupta.

Originally published as Rio Tinto still waiting for Sanjeev Gupta to pay $64m owed from Dunkirk smelter sale