Sanjeev Gupta is looking to offshore potentially hundreds of millions to prop up UK operations

Hundreds of millions of dollars on the books of one of GFG Alliance’s Australian subsidiaries could be sheeted home to prop up the ailing parent company, which owes $950m to creditors.

Hundreds of millions of dollars on the books of one of GFG Alliance’s Australian subsidiaries could be sheeted home to prop up the ailing parent company, whose $950m in unpaid debts are in the sights of the administrators of failed financier Greensill.

Grant Thornton, the administrator of Greensill which failed spectacularly in 2021, revealed in documents filed with Companies House in Britain that it has appointed a restructuring adviser to canvass its options around the $US587.2m ($874.4m) Sanjeev Gupta’s GFG Alliance owes to Greensill.

None of this debt has been paid back, despite Mr Gupta striking several agreements to do so in recent years.

Meanwhile ratings agency Moody’s, in a report released this week, says it understands that InfraBuild – one of GFG’s two major Australian subsidiaries – is in talks to unlock funds held in escrow on the balance sheet as security for another debt, with that money to be “used for a distribution to facilitate a settlement at the ultimate parent group, GFG Alliance, with its creditors’’.

InfraBuild’s most recent financial report, for the 2023 financial year, shows it had $626.7m in “restricted cash” on its books as of June 30 last year, which was “required to be set aside by contractual agreements to support issued bank guarantees and the mark to market of certain outstanding derivatives’’.

At the time InfraBuild also had $450.6m in unrestricted cash in the bank, $1.03bn in interest-bearing liabilities and another $296.5m in interest-bearing lease liabilities. The company has not filed its accounts for the most recent financial year as yet.

When asked specifically about whether the company was in fact looking to remit funds from Infrabuild to prop up GFG, a company spokesperson did not address the question in the supplied response.

Grant Thornton said Mr Gupta had struck several non-binding agreements to pay back the debt over the past three years, but had not followed through with ­payment.

GFG Alliance’s defaults were a key reason Greensill went under. Picture: Ben Stansall/AFP

“As we have reported previously, non-binding term sheets were signed with Sanjeev Gupta in November 2022, June 2023 and November 2023 … with a view to implementing a consensual settlement of the amounts owing,’' Grant Thornton said in the report.

“Following continued negotiations with Sanjeev Gupta and GFG, we signed a further revised non-binding term sheet in March 2024; the transaction as envisaged under the latest non-binding term sheet would encompass all amounts due to Greensill Capital UK (GCUK), and, if implemented, would result in a below par recovery to GCUK funded by both lump sum and bullet repayments.’’

Grant Thornton said legal work relating to the proposed settlement has been funded to date by a capped indemnity backed by GFG. “However the funding to cover legal costs of preparation of this consensual agreement has recently been exhausted, with no further funding having been provided by GFG to date of this report,’’ it said.

“To the extent that we are not able to agree and implement the restructuring and reflecting the extended period of time that has passed while negotiations have been ongoing, we continue to consider the recovery options that are available to GCUK, under the security and guarantees granted by GFG in connection with the GFG programs.

“In respect of our planning, we are working with an independent restructuring adviser.

“However we are not able to provide the details of such strategies so as not to prejudice our ­position.’’

Grant Thornton said debts were owed across 33 separate ­balance sheet items.

GFG Alliance executive chairman Sanjeev Gupta. Picture: John Feder

GFG Alliance’s defaults on debt repayments were a key reason for the 2021 failure of Greensill, with the financier extending billions in debt and supply chain financing to Mr Gupta’s global group of companies.

A GFG Alliance spokesperson told The Australian: “It is a complex restructuring taking place in a difficult market environment which has taken longer than expected. Productive negotiations continue and we expect to close out the Greensill debt restructure in 2024 which will open up many new possibilities for financing.”

GFG’s local operations, LPMA and Infrabuild, have been profitable in recent years, however Whyalla steelworks operator LPMA will post an as-yet unquantified loss for the most recent financial year, as revealed by Mr Gupta in September, with low steel prices and an extended shutdown of the blast furnace to blame.

The blast furnace came back online in June but was shut down again in September after “unwanted material’’ was introduced to it. It is yet to come back online.

LPMA laid off 50 white-collar staff in August followed by an estimated 100 jobs to go from the mining division over time as the company’s hematite iron ore operations are wound down.

Suppliers have also been complaining anonymously they are being paid late.

Mr Gupta said last month he remained committed to his vision to produce “green steel” at Whyalla by installing a new direct-reduced iron plant and an electric arc furnace.

How this project, which would run to at least half a billion dollars in capital expenditure, will be financed, remains to be seen.

The federal and South Australian government have committed – but not handed over – $63m and $50m in grant funding respectively, tied to milestones, which can be used to part-fund the project.

The project is forecasted to be operational in 2027, two years later than originally expected.

Mr Gupta has also come under fire for recently shelling out $12.5m to buy a waterfront apartment on Sydney Harbour, to add to his $34m Potts Point mansion Bomera, while his Australian business interests are struggling.

InfraBuild declared a net profit of $239.6m in fiscal 2023 on revenue of $5.69bn, and paid its parent a dividend of $37.8m.

Moody’s, which this week downgraded the company’s credit rating from B3 to Caa1 – deep in junk bond territory – said it expected InfraBuild’s performance to decline over the next 12 months on weakness in Australia’s resdeitnal construction sector and weak steel prices.

Originally published as Sanjeev Gupta is looking to offshore potentially hundreds of millions to prop up UK operations