Sanjeev Gupta’s GFG Alliance is understood to be in talks with special situations groups to secure about $500m in new funding for its South Australian steel manufacturing operations at Whyalla to plug the hole left by the collapse of finance provider Greensill.
In Australia, GFG Alliance owns at Whyalla an iron ore mine, a small port and a steel mill in addition to its steel products manufacturing company InfraBuild.
It is understood that GFG is looking to address the funding challenges at its Whyalla operations separately to those with respect to InfraBuild.
The InfraBuild business is performing strongly, while Whyalla has always faced greater challenges turning a profit.
But it is understood that there are no cross guarantees with respect to the debt between the Whyalla steelworks and InfraBuild, so should Whyalla collapse, InfraBuild would not be responsible to help pay its loans.
It remains unclear what specific groups have been in talks with GFG Alliance over Whyalla, but sources say they are believed to be local funds like Soliton Capital and US-based groups like Apollo, Bain Capital and Carlyle to offer solutions.
The understanding is that Whyalla is in need of about $500m.
The South Australian town is heavily reliant on the steelworks for employment and the GFG assets there were previously part of the collapsed company Arrium before being acquired by Mr Gupta’s global empire.
Market sources have suggested that GFG has sounded out the market for a sale of the port in the past two years, but there has been little interest.
InfraBuild, meanwhile, has $US250m of loans through a working capital facility to JPMorgan. It also has $US325m worth of bonds, and sources say the bond debt has been trading at about 90c in the dollar.
It comes as private equity firm Brookfield has been carrying out due diligence on InfraBuild with help from adviser PwC as it continues to perform strongly at a time of booming steel prices.
Most are now doubtful that InfraBuild’s plans for an initial public offering slated for later in the year will proceed.
GFG Alliance is Greensill’s largest customer and when the supply chain finance provider collapsed into the hands of administrator Grant Thornton a few weeks ago, it was understood to owe at least $US5bn to Greensill.
It has been trying to achieve a standstill on its payments.
Sources also say some of Greensill’s customers have hired advisers to help deal with the company’s collapse.
While it remains unclear who all of the customers are, in the recent past they are understood to have included CIMIC, Telstra, Coles and Woolworths.
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