Sanjeev Gupta’s InfraBuild has a high risk of default on $880m in debt, ratings agency Fitch says

Sanjeev Gupta’s InfraBuild could default on $880m in debt imminently according to ratings agency Fitch, while cheap steel imports will put further pressure on profitability.

Sanjeev Gupta at the Whyalla steelworks.

A default over $US550m in debt owed by Sanjeev Gupta’s Australian steel products company InfraBuild “could be imminent” Fitch Ratings says, while warning that cheap steel imports will put further pressure on the beleaguered company.

Infrabuild and OneSteel Manufacturing – the owner of the Whyalla steelworks which was placed in administration in mid-February – delayed the lodgement of their 2024 financial year reports while Mr Gupta’s global group, GFG Alliance, sought to settle a deal over $US5bn in debt owed to the creditors of GFG’s failed financier Greensill.

While Mr Gupta announced early this year that a deal had been agreed – but not signed – it is understood that this deal fell apart when the South Australian government pushed the steelworks into administration, with OneSteel itself owing more than $1.3bn.

InfraBuild is claiming to be the largest creditor of OneSteel, saying it is owed more than $500m – debts which the administrator KordaMentha has said will be closely examined.

Fitch said this week that InfraBuild’s inability to lodge its financial report by the end of March meant a default on the company’s senior secured notes could be imminent, and downgraded InfraBuild Australia’s credit rating from CC to CCC-.

Under the Fitch ratings system, this indicates that the debt has a “very low margin for safety’’ and “default is a real possibility’’.

Fitch said while GFG was looking to strike a deal over the Greensill debt, there were also other facilities which needed to be refinanced, further complicating the situation.

“The rating downgrade is based on our assessment of an elevated probability of default by InfraBuild on its $US550m notes within the next three months as the company has not yet published its audited financial statements for the financial year ended June, 2024,’’ Fitch said.

Anthony Albanese at the Whyalla Steelworks after announcing a $2.4bn bailout package.

“The company expects the audit process to be completed after its parent, GFG Alliance, reaches a formal settlement with creditors of Greensill Capital.

“We believe completion of the audit would also require InfraBuild’s directors to approve the distribution sought by GFG Alliance for the settlement, and certainty over the refinancing of InfraBuild’s $US150m asset-backed term loan due May, 2026.

“We think these conditions are difficult to meet in a timely manner.

“We also see risk of a covenant breach under the ABTL within the next six months, unless InfraBuild’s EBITDA recovers. A covenant breach, if not waived, could lead to payment acceleration and a liquidity crunch.’’

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Fitch also warned that it saw limited potential for an improvement in earnings in the next six months “due to the risk of an increase in cheap steel imports into Australia’’.

Fitch said InfraBuild had twice in the past struck an agreement with its senior secured noteholders to delay the publication of its financial reports, first until the end of January this year, and then until the end of March.

“An agreement may not be reached with the majority of noteholders to extend the time frame for audited statements beyond 31, March 2025,’’ Fitch said.

“That would lead to an event of default under the notes and principal acceleration.

“Even if the noteholders agree, we think they may require the statements to be available within the next three months. We see impediments to the timely completion of InfraBuild’s audit process, which means a default under the notes could be imminent.’’

Fitch said that based on unaudited financial statements, InfraBuild’s EBITDA fell 43 per cent in the first half of FY25.

The Whyalla steelworks is now under the control of administrators.

Earnings would come under further pressure as US steel tariffs potentially diverted steel imports into Australia, Fitch said.

The ratings agency said it believed InfraBuild would breach the covenants of the ABTL by the first quarter of FY26 without a “sharp” earnings recovery, and said efforts to refinance the facility might not succeed.

“InfraBuild is working to refinance the ABTL within the next few months, to complete the audit process for FY24 financials and avert a bond default,’’ Fitch said.

“The company is engaging with new investors in addition to the existing lenders, BlackRock and Silver Point Finance.

“We think the weak EBITDA outlook will hamper the refinancing process and it may not be completed in time.’’

Fitch said InfraBuild was pursuing asset sales in the US and Australia, which could boost its credit profile, but the company had pushed back the expected receipt of about $75m in sale proceeds to the final quarter of this financial year “and we have not included them in our forecast due to uncertainty’’.

A reset of the amount it pays the Whyalla steelworks for steel billet could also be a negative, Fitch said.

GFG Alliance was contacted for comment.

Originally published as Sanjeev Gupta’s InfraBuild has a high risk of default on $880m in debt, ratings agency Fitch says