Fear of Chinese Sinks PE Exit of US-based Aluminum Company

Commodities (Long Regulatory Risk! Short Aluminum?)

Per Reuters, Zhongwang USA announced earlier this week that it had called off its proposed $2.33b acquisition of once-bankrupt U.S. aluminum company, Aleris Corporation, after facing opposition from Wilbur Ross and the U.S. Committee on Foreign Investment in the United States. The issue is China, of course, which has used its competitive manufacturing advantage to effectively decimate America's aluminum capacity. It also doesn't help - for obvious reasons - that Aleris supplies America's largest combat aircraft manufacturers. Elsewhere in the world of aluminum, publicly-traded REAL ALLOY ($RELY) filed for bankruptcy this week after succumbing to its over-levered balance sheet. Why so much debt, you ask? The debtor levered up in 2015 to fund the $554.5mm purchase of aluminum recycler Real Industry Inc. from...wait for it...Aleris Corporation. Aleris is owned by Oaktree Capital Management LP ($OAK) and Apollo Management LP ($APO), which appear to have shed Real Industry Inc. at an opportune time. You win some, you lose some.