What is the legal ruling of the aforementioned transaction according to Sharia, given that my father took out an interest-bearing loan to purchase the factory?

The described scenario is a "bay' al-wafa'" (sale with a right of redemption), which is considered invalid by the majority of jurists because it is a usurious loan. What is obligatory is to return the factory to its owner, and for your father to return the monthly rent he received. It is permissible for your father to purchase a part of the factory to become a partner in it or to rent it from its owner. Your father must repent to Allah for borrowing with usury and engaging in the prohibited "bay' al-wafa'".