Greensill collapse sparks Gupta InfraBuild warning: Fitch

Fitch placed InfraBuild’s credit rating under review following the collapse of his chief lender, Greensill Capital.

Sanjeev Gupta. Picture: John Feder/The Australian

British industrialist Sanjeev Gupta has been dealt a fresh blow after Fitch placed InfraBuild’s credit rating under review following the collapse of his chief lender, Greensill Capital.

The credit ratings agency has put both the BB- ratings for Mr Gupta’s InfraBuild, his most profitable asset, and the BB rating on its $US325m senior secured notes due October 2024 on ratings watch negative.

That could lead to a downgrade and follows Moody’s issuing a downgrade on Thursday, cutting the credit rating of InfraBuild from Ba3 to B1 and heaping further pressure on Mr Gupta’s GFG Alliance, which faces calls on debt of up to $US5bn owed to Greensill.

The fallout from Greensill’s slide into administration and the contagion effect it could have on Mr Gupta’s empire were noted by Fitch.

“GFG Alliance‘s financing has been affected by the collapse of Greensill Capital, which filed for administration. Problems at GFG Alliance could have a contagion effect on its various companies, including the Whyalla steelworks and InfraBuild, and it may increase pressure on InfraBuild’s liquidity and disrupt the timely supply of billets and structural steel,” Fitch said in a statement on Monday night.

InfraBuild is the jewel in GFG’s crown, and Mr Gupta is still seeking to float the company - a profitable arm of his Australian businesses that runs electric arc furnaces, steel distribution, recycling and construction materials centres that employ about 4500 people across Australia.

Still, Fitch said InfraBuild has adequate liquidity of $250m via an asset-based lending facility which matures in October 2022 and the group does not have factoring arrangements or credit facilities with Greensill.

“We expect InfraBuild to rely on refinancing to address its long-term debt maturities. We believe it should be able to manage its refinancing needs due to its sizeable unencumbered property assets,” Fitch said.

Moody’s said restrictions in InfraBuild’s financing documents would ultimately limit the amount of cash the broader GFG could draw from its books, but said the company’s liquidity was highly sensitive to working capital requirements, and said the exposure of Mr Gupta’s other Australian assets to Greensill - such as the Whyalla steel works, a key supplier of raw materials to InfraBuild - could hurt the company.

The British industrialist told staff in a memo late on Friday he was still negotiating a temporary repayment standstill with Greensill, in a bid by the steelmaker to prevent its debts being called in ­immediately.

While “enthused” by the amount of refinancing offers, Mr Gupta said in the internal email the process would take some time to organise given the scale of its operations.