FT: TPG In Fight Over Aleris Funding

(Reuters) – U.S. private equity firm TPG is offering to provide bankruptcy financing for Aleris International Inc, a company that it owns, in a strategy that could put it in the position of being paid before some other creditors, the Financial Times said.

Aleris, a maker of aluminium products, filed for Chapter 11 bankruptcy protection last month.

Distressed-debt investors, led by Oaktree Capital and Apollo, offered to provide Aleris with $500 million in new money for debtor-in-possession (DIP) financing, the paper said.

TPG asked the judge in the bankruptcy case to allow it to join the group offering the DIP facility, according to the paper.

TPG also instructed its investors to write cheques for a total of $28.5 million “to allow us the flexibility to potentially purchase the DIP term loan as it begins to trade in the secondary market,” the paper said.

DIP financing is senior to other claims, meaning it gets paid first, even before lenders who financed the original buyout deal, the paper said.

The other DIP lenders are opposing TPG’s participation in the financing round and the judge is expected to rule on TPG’s request this month, the paper said.

Wall Street executives are concerned that the TPG action could herald attempts by buyout firms to offer DIP financing as a way of salvaging their investments, according to the paper.

TPG could not be immediately reached for comment by Reuters.

TPG, through affiliate Aurora Acquisition Holdings, bought Aleris in December 2006, for about $1.7 billion, plus the assumption of about $1.6 billion in debt.

(Reporting by Ajay Kamalakaran in Bangalore, Editing by Muralikumar Anantharaman)