Braidy Industries site fence 11-5-19

A fence that Braidy Industries cost more than $100,000 was erected in late 2019 around the site where the company hopes to build an aluminum mill near Ashland, Ky. The company is now called Unity Aluminum.

LOUISVILLE (WDRB) – The company formerly known as Braidy Industries, which hopes to build an aluminum plant in northeast Kentucky, has acknowledged failing to satisfy a requirement of Kentucky's investment of $15 million under former Republican Gov. Matt Bevin in 2017.

But the company, now called Unity Aluminum, is asking the state to forego its right to demand repayment of the taxpayer money.

Instead, Unity Aluminum wants an additional 18 months to raise the equity and debt needed to build the much-anticipated $1.7 billion aluminum rolling mill near Ashland, according to letters obtained by WDRB under the Kentucky Open Records Act.

Gov. Andy Beshear said in a statement Thursday that he would be open to granting the company an extension, but Beshear in recent months has also disclaimed direct responsibility for decisions about the state's investment, instead deferring to a state-appointed board.

Bevin and other state leaders years ago heralded the planned aluminum plant and its promised 600 good-paying jobs as the beginning of an economic revival of Appalachia. The project was often touted as an example of the fruits of Kentucky’s adoption of “right-to-work” policies.

The state community college in Ashland set up a two-year technical program designed to feed graduates to work in the high-tech plant. But while students enrolled in the program, the jobs haven’t materialized, as the company hasn’t raised the capital necessary to build the plant.

Last year, the company’s board members ousted Craig Bouchard, the smooth-talking Braidy Industries founder and CEO, accusing him of jet-setting around the world but not making progress on raising money for the mill. They then paid Bouchard $6 million to give up his equity and make a “clean break” from the company.

In the wake of Bouchard’s exit, a new management team took over, including Terry Gill, who oversaw the state investment as Bevin’s economic development secretary from 2017 to 2019. Gill is now interim president of Braidy Atlas, the aluminum rolling mill subsidiary of Unity Aluminum. The company said his compensation is private.

Beshear takes back seat

Meanwhile Beshear -- a Democrat who last year vowed to “go get” the state’s money back if the aluminum plant idea turns out to be a bust – has in recent months taken a passive role in the Unity Aluminum saga.

In December, a state economic development board chaired by Beshear voted to hand direct control over the Unity Aluminum investment back to Commonwealth Seed Capital, the “independent” venture fund owned by state government, which made the Braidy Industries investment in 2017.

It's now up to Commonwealth Seed – not Beshear’s economic development cabinet and the board Beshear chairs -- to decide whether to give Unity Aluminum more time to realize the aluminum plant vision.

Commonwealth Seed has its own board of directors, who are appointed by the board that Beshear chairs, the Kentucky Economic Development Partnership Board. They oversee dozens of small investments in early-stage, Kentucky-based companies.  

Beshear, who took office in December 2019, has said multiple times that he wouldn’t hesitate to seek the return of Kentucky’s money invested in Braidy Industries, but that he still hoped for the project to materialize.

“If there is a point where we believe the project is not going to move forward, you bet I am going to do everything I can to get that $15 million back,” Beshear said on Feb. 21, 2020.

In a statement, Beshear's office said, "Commonwealth Seed Capital is the state’s main entity for investing directly and managing investments in Kentucky’s tech startups and angel funds. It’s been established as such for two decades and continues – with our administration’s full confidence – to be the appropriate entity to carry out those responsibilities."

It’s not clear whether Commonwealth Seed has agreed to the extension sought by Unity Aluminum. Commonwealth Seed’s executive director Gene Fuqua hasn’t responded to calls and emails since Tuesday.

Beshear's statement signaled that he would support giving the company more time, though he said that's not up to him. 

"With regard to an extension, the decision is CSC’s but I think it’s fair to say all parties want to give development in Eastern Kentucky – and everywhere in the state – every reasonable chance to succeed," Beshear spokesman Sebastian Kitchen said. 

In pushing decisions over the $15 million investment further down the organization chart in state government, Beshear reversed a 2018 action by Bevin.

Under Bevin, the state in 2018 took decision-making control over the $15 million investment from Commonwealth Seed and vested it with the Kentucky Economic Development Partnership Board, which the governor chairs.

Bevin then signed off on relaxed terms for Kentucky’s right to recoup the $15 million from the company, giving the then-Braidy Industries a pass for not starting construction of the mill by mid-2018.

Now, the company acknowledges it failed to meet one of the requirements of those relaxed terms: To “invest” at least $1 billion in the construction of the aluminum plant by Dec. 31, 2020, or to “secure” that  $1 billion investment in a separately owned entity.

Unity “has not met and will not meet” that requirement, the company’s acting CEO Don Foster wrote to Commonwealth Seed’s Fuqua in a letter dated Jan. 15.

“However, Unity Aluminum has made great progress towards meeting that requirement despite the COVID-19 pandemic and its severe impact on the local, regional and global economy,” Foster said in the letter.

Unity Aluminum declined to say whether it has reached an agreement with Commonwealth Seed but said it will “cooperate fully” with state venture fund, according to Unity Aluminum spokeswoman Kaylee Price, of Louisville’s RunSwitch Public Relations.

Whether to seek the return of the state’s money is a tricky calculus. When a start-up business fails, equity investors “almost always” lose all the money they put into it, said Charlie Moyer, a finance professor and former business school dean at the University of Louisville.

While Kentucky has an unusual right to reclaim its $15 million (plus 8% annual interest), waiting too long to do so could leave the state with nothing to collect. At the same time, exercising the repayment right could doom the project.

Unity Aluminum’s success “hinges on the Commonwealth of Kentucky’s continued support,” Foster wrote in the Jan. 15 letter.

Commonwealth Seed has until mid-April to decide whether to seek repayment of the $15 million, according to the terms of the 2018 deal.

Funding progress

Unity Aluminum remains well short of the $500 million in investor money that company officials have said in the past is necessary to enable the financing of the $1.7 billion project.

The company said in the Jan. 15 letter that its “goal” is to have “permanent project financing complete by the third quarter (July-September) of 2021” and it has hired investment bank Headwall Partners to lead the funding campaign.

In the letter, Foster wrote that the company has “raised over $165,000,000 in equity.”

The company previous disclosed about $155 million in equity raised through the end of 2019, according to WDRB’s analysis of its public statements of cash flow.

That includes $75 million contributed by a unit of the Russian aluminum giant Rusal, which in 2019 committed $200 million to the aluminum plant but withheld the remainder of the investment while waiting to see if the company can secure other investors.

Rusal’s investment wasn’t in Unity Aluminum but in a subsidiary, Braidy Atlas, which Rusal and Unity jointly own. Braidy Atlas would build and operate the mill, with Unity owning 60% and Rusal owning 40%.

Unity Aluminum disclosed a few new details about its financing efforts in the Jan. 15 letter.

Foster said the company has a “mandate letter for approximately $580,000,000 in senior secured debt” from KFW IPEX-Bank, a German financial institution that lends to customers to help them buy German-manufactured goods. Unity plans to purchase equipment for the mill in part from SMS Group, a German company.

Unity Aluminum also disclosed “a term sheet commitment for up to $300,000,000 in junior debt” from an undisclosed lender.

Junior debt would have lower repayment priority in case the company fails and may come with a high interest rate or warrants to convert the debt into Unity Aluminum stock if the company succeeds, said Moyer, the U of L finance professor.

Moyer said the Unity Aluminum letter doesn’t disclose enough about the financing avenues to evaluate how likely they are to materialize.

Manning Warren, a U of L law professor who specializes in corporate securities, said term sheets serve as guides to a lender’s deal with a borrower but typically don’t constitute an actual deal.  

“Generally, the term sheet is not a binding contract but more akin to a letter of intent,” he said in an email.

Price, the Unity Aluminum spokeswoman, declined to answer questions about the company’s equity and financing prospects, citing federal and state securities laws.

Foster said in the letter that the company’s new management has “cleaned up past issues and prepared the project to be professionally presented to the financial markets.

“Unity Aluminum remains committed to this project that will bring significant investment, jobs, and economic development to the Ashland area.”

John Mozena, president of the Center for Economic Accountability, a nonprofit that seeks free-market reforms to state and local economic development incentives, said Kentucky should not give Unity Aluminum a second extension.

"One big reason for that is that the more a state gets a reputation for not holding companies to their economic development contract promises, the more that state starts attracting shady developers and companies looking for that kind of no-consequence handout or slap-on-the-wrist oversight," Mozena told WDRB in an email. " ... This kind of deal demonstrates why it’s a terrible idea for states to make investments in private companies. If a business plan makes sense, there’s a global financial industry out there that competes to invest in and make a profit from good businesses."

Reach reporter Chris Otts at 502-585-0822,, on Twitter or on Facebook. Copyright 2021 WDRB Media. All rights reserved.