Thu 05/13/2021 10:14 AM
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Investors are circling the sale of GFG Alliance’s French steel plants Ascoval and Hayange, sources told Reorg. GFG Alliance hired Rothschild to run an accelerated M&A process of the two assets, sources confirmed. Continue reading for our EMEA Middle Market team's analysis of  and request a trial for access to our coverage of thousands of other high-yield, stressed, and distressed debt situations as well as access to the linked documents.

According to the Financial Times, the two French steel plants were put up for sale after GFG Alliance failed an attempt to refinance. The group has struggled to attract new financiers since its main lender, Greensill Capital, collapsed into administration in March, the article added.

A number of funds, including Ascoval’s former owner Greybull Capital, have expressed interest in acquiring the assets, sources said. The two companies need new funders to support working capital needs, sources added.

The two steel plants will be sold together due to the complementary nature of the assets, sources said. Ascoval uses recycled steel to make parts for railway track manufacturer Hayange.

Sources added that the French state may prefer a French industrial buyer to take over the assets as opposed to a private equity group, as a domestic company would be more likely to protect jobs at the steel plants.

In March, French finance minister Bruno Le Maire announced that the French state provided a €20 million loan to Hayange and Ascoval to allow the steel plants to pay its workers. Le Maire also expressed an intention to support the Ascoval and Hayange’s employees.

GFG Alliance subsidiary Liberty Steel acquired Hayange and Ascoval in August 2020 following the decision in July by the Tribunal de Grande Instance de Strasbourg to award Hayange to Liberty Steel Group, according to a statement at the time. Liberty Steel invested €17 million into Ascoval following the acquisition, sources said.

According to a report from the European Commission from July 2020, both assets were in a state of “financial distress” and “it is essential that the transactions can be completed quickly in order to inject new urgent funding (from Liberty) and then secure long term financing from banks.”

Ascoval has been facing financial difficulties for several years and was undergoing pre insolvency sauvegarde proceedings in France since November 2017, the report said. According to the report, both assets generate EU-wide annual revenue of about €250 million.

Ascoval was formerly owned by Greybull Capital, which acquired the steel plant out of administration in 2019 and implemented a turnaround strategy.

A spokesperson for Liberty Steel told Reorg: "Liberty Steel France, which incorporates Liberty Ascoval and Liberty Rail Hayange, has faced a significant reduction in working capital support since the collapse of Greensill Capital. Given the strength of the steel market and the high quality products we produce, we remain confident that we can secure new financing. At the same time, we are taking prudent steps to explore sale options for these businesses and will be inviting interested parties to submit offers.”

GFG Alliance controls a collection of predominantly mining and metals businesses. GFG is working with Alvarez & Marsal and PJT Partners to advise on potential new sources of funding.

Several GFG group companies have filed for insolvency or restructuring proceedings in recent weeks. In mid-April, GFG Alliance company Alvance’s iron and aluminum foundries at Poitou, France, and its wheel manufacturing unit at Chateauroux, France, had voluntarily entered into conciliation proceedings. Citibank NA filed a winding up application in the Supreme Court of New South Wales against OneSteel Manufacturing, trading as Liberty Primary Steel and Tahmoor Coal Pty Ltd., while Credit Suisse applied to U.K. courts to wind up GFG group entities.

Rothschild and Greybull declined to comment.

--Lara Gibson, Andrew Ross
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