GENEVA – For nearly a decade, Trafigura Group chairman Claude Dauphin coveted a zinc deal with Europe’s top smelter. The commodities trader finally got across the threshold in 2015, months after its co-founder’s sudden death.

Just a few years later, it’s become one of Trafigura’s biggest headaches.

Nyrstar NV shares have plunged to record lows as falling zinc prices squeeze profit and drive worries about its huge pile of debt. Nyrstar, which is scheduled to publish its third-quarter report next week, has 340-million euros of bonds ($388 million) maturing in September next year that analysts at ABN Amro Bank NV and ING Bank say the company may struggle to refinance.

That’s raising questions about whether top shareholder Trafigura will need to put more money into the struggling company. The pain keeps getting worse. On Wednesday, the stock plunged 25% and the bonds tumbled after Morgan Stanley analysts said the shares could be worthless. Nyrstar dropped another 11% on Thursday morning.

Trafigura owns more than 24% of the Belgian company, but its exposure doesn’t end there. The No. 2 metals trader has made prepayments to Nyrstar as part of its offtake agreements and has provided the company with a $250 million working capital facility.

The crisis at Nyrstar is another problem for Trafigura as the commodities trading industry globally faces declining profits and the fallout from bad investments. Louis Dreyfus Holding BV bailed out its Brazilian sugar business Biosev earlier this year, and Noble Group is in the process of a debt restructuring.

Nyrstar’s troubles have already drawn the attention of hedge funds specialising in distressed debt, according to people familiar with the matter. The funds are looking at the company amid expectations that it may struggle to raise sufficient funds to repay the September 2019 bond, said the people, who asked not to be identified discussing private information.

Trafigura “remains a supportive shareholder” of Nyrstar, a company spokeswoman in Geneva said. The company declined to answer further questions. Nyrstar declined to comment.

For Trafigura, the Nyrstar relationship represented a chance to challenge its arch-rival and industry leader Glencore Plc in the zinc market. Dauphin was passionate about the lead and zinc business, having led trading of the metals at Marc Rich + Co. before he went on to co-found Trafigura. He was affronted to have lost out in 2008, when Glencore won a major Nyrstar trading deal, and again in 2013, when he was edged out by Noble Group Ltd. for another contract to market Nyrstar’s zinc.

Today, Trafigura’s stake in Belgium-based Nyrstar is worth more than 200 million euros less than it paid for the shares, according to analyst estimates and data compiled by Bloomberg.

To be sure, the Nyrstar investment hasn’t been all bad for Trafigura. The relationship has helped the commodities trader secure deals to supply zinc concentrates to its smelters, as well as for much of Nyrstar’s refined zinc production including the bulk of both marketing deals coveted by Dauphin that were wrested away from Noble and Glencore. Nyrstar has said it buys its concentrates at a significantly higher price than the annual benchmark level.

Nyrstar will probably have to issue new equity to meet its obligations, or undergo a more formal debt restructuring, according to ABN Amro’s Philip Ngotho.

For Trafigura, that would represent a dilemma: increase its exposure to the struggling company by putting in further cash in the form of debt or equity; or risk seeing its investment wiped out altogether. Trafigura could also issue a bridge loan to Nyrstar or increase the working capital facility.

“I can imagine that Trafigura would prefer not to be the only provider of capital to Nyrstar as it would be significantly increasing its risk exposure,” said Ngotho, who has a sell rating on the stock.