Liberty used Dunkerque stock to help finance purchase

Sanjeev Gupta's Liberty Aluminium TS used inventory at Rio Tinto's Dunkerque smelter to finance the purchase of the asset, before Liberty actually owned it.

The day before the transaction closed on 14 December, Liberty bought $50mn of aluminium and alumina from the French smelter, which it immediately sold to two of the companies referred to by Liberty employees as 'friends of Sanjeev' — entities with close links to Liberty — MMT Metals and StarCom Grain. StarCom Grain was run by Ajay Aggarwal, brother-in-law of Sanjay Tohani, who now works in the family office of Liberty's parent company, GFG Alliance, and was previously director of Liberty Steel Newport. StarCom is not known to have prior aluminium trading experience.

Aggarwal is now a business development manager for GFG Alliance, and sits on the board of Liberty's Galati plant in Romania.

Gupta's bank Wyelands lent $18.4mn to MMT Metals and $15.7mn to StarCom to fund their purchase of the material from Liberty Aluminium TS. Wyelands registered a charge on MMT Metals on 12 December 2018, before completion of the smelter's acquisition.

This financing allowed Gupta — by using money deposited at Wyelands — to reduce the amount of equity he had to put into the deal, as well as cutting the asset price by $50mn.

Wyelands took debenture over MMT and Starcom shares, as well as Liberty Aluminium TS, as part of the deal.

On 27 November 2018, prior to the closing of the smelter deal, Liberty House Group entered a contract with Trafigura for aluminium offtake. Liberty House Group was an entity legally distinct from those used to acquire and hold the Dunkerque facility.

The contract stipulates delivery of 560,000t of metal between 1 January 2019 and 31 December 2024, with a minimum quantity of 7,750 mt/month, plus or minus 2pc. For the first 460,000t of metal delivered under the contract, there is a marketing discount of $20/t, with quotation period optionality for the buyer.

By Colin Richardson