A move by CIMIC subsidiary Thiess to pull a $1.3bn bond from the market in the past week may have been related to loans the group has had to troubled financier Greensill, say sources.
Thiess has been making efforts to tap the bond market for $1.3bn after a 50 per cent stake was offloaded to global fund Elliott Management Corporation to replace existing debt.
CIMIC received $2.1bn of net proceeds from the transaction.
Originally, Thiess was planning to issue bonds with a seven-year and eight-year maturity, with a yield of around 5 per cent.
That was later adjusted to one seven-year issue at a 6 per cent rate.
However, the raise was pulled on Friday night, say sources, who believe more challenging conditions played some part.
But some say the fact that 10 per cent of CIMIC’s working capital has funded by Greensill — thought to equate to about $100m — could be a factor.
CIMIC declined to comment but has told the market that it has been reducing its exposure to the sort of debtor financing that Greensill provides.
Earlier, CIMIC had been working with investment bank JPMorgan for a potential sale of Thiess and now the understanding is that it is moving towards an initial public offering, which is likely to occur next year with Goldman Sachs also involved.
The understanding is that first Thiess plans to acquire other mining services providers to diversify its business away from the coalmining sector, which is out of favour with investors due to concerns about its impact on the environment.
Takeover targets could include Western Australia-based businesses such as MACA and Perenti, say market experts, or Macmahon Holdings, which it has attempted to acquire in the past.
London-based Greensill Capital, meanwhile, founded by Lex Greensill, has appointed Grant Thornton to explore restructuring options to stave off the prospect of insolvency after European bank Credit Suisse suspended $10bn of investment funds.
Talks are under way with private equity fund Apollo Global Management to sell it its operating business for about$US100m.
The deal would exclude Greensill’s bank debt, with the infrastructure part of the business and its platforms sold, say sources.
Greensill offers short-term working capital to its clients, which over time are understood to have included Telstra, Woolworths and Coles as well as CIMIC.
Among Greensill’s other customers are understood to include the South Australian steel works business at Whyalla, owned by the interests of Sanjeev Gupta, while troubled coal miner Griffin Coal was also thought to have had some exposure, although it is unclear if it is currently a lender.
Mr Gupta has recently appealed to the South Australian government for funding assistance on Whyalla.
Sources say that Greensill pushed aggressively into the Australian market and special finance providers would be keen to offer loans where funding gaps exist for their customers.
Griffin Coal has loans worth about $1bn and is bank-guaranteed by ICICI bank.
It fuels the Bluewaters Power Station in Western Australia.
The coal mine’s parent company has been in receivership through PwC and efforts have been made to sell the asset. The cashflow from the mine has not enough to service the debt.
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