US private equity showing interest in InfraBuild

InfraBuild It is owed $156m by the Whyalla steelworks, while bondholder FitzWalter Capital Partners is demanding an immediate $800m.

US private equity firm Apollo Global Management is believed to be keeping an open file on Sanjeev Gupta’s InfraBuild should it become available for sale at a discount price.

It comes amid a growing focus on the steel business that sits within Gupta’s troubled GFG Alliance empire and with the unravelling of the Whyalla steel works in South Australia that is within the GFG stable.

Whyalla’s collapse triggers technical debt defaults within InfraBuild, say sources, and there’s questions as to how much cash could get sucked out of the company from parent guarantees for other parts of the business.

DataRoom reported earlier that suitors were starting to circle.

The understanding is that the business has been examined by Apollo, which counts former Rio Tinto mining operative Trevor Mills within its ranks.

Apollo, which has invested in financial group Challenger and services company Ventia, is no stranger to the local market, weighing up involvement in various special situations.

Another party understood to have shown some interest in buying InfraBuild is Reo Steel, run by the Ibrahim family, which is InfraBuild’s largest competitor in steel bars. But sources say it would not have the capital to buy InfraBuild, which would come with a price tag in the billions as a dominant Australian industry player.

InfraBuild was always considered the jewel in the crown of the GFG empire, but now it remains in the spotlight as its bonds trade on the secondary market with some aggressive funds out of the US said to be buyers.

Sources have suggested Gupta has been eager to embark on a sale and leaseback of some of the InfraBuild assets, but the company itself is taking a differing position.

There’s also been speculation about the sale of non-core steel assets within InfraBuild to raise funds. Bond holders in 2023 were said to be owed $US350m. In addition, there are loans on assets worth about $200m.

According to a US offer memorandum for the 12 months to March last year, InfraBuild generated $411m in earnings before interest, tax, depreciation and amortisation, but that believed to have fallen since then. Its debt was about $1.5bn, including leases and loans from related parties.

It is owed $156m by the Whyalla steelworks, while bondholder FitzWalter Capital Partners, backed by former Macquarie executive Ben Brazil, is demanding an immediate $800m repayment from GFG Alliance. The latest documents show InfraBuild posted an $81m half-year loss.

InfraBuild’s steel distribution business is Australia’s largest processor and distributor of long-steel products and produces 1.4 million tonnes of recycled steel across the country.