UPDATE 1-InfraBuild Bonds Struck As Greensill Collapse Draws Fitch Warning
(Add a denial comment from GFG Alliance)
LONDON, March 15 (Reuters) – Australian steelmaker InfraBuild’s bonds fell on Monday after rating agency Fitch put it under scrutiny for a downgrade amid uncertainty caused by Greensill’s collapse Capital, the main funder of its parent company GFG Alliance.
GFG Alliance, a holding company for the assets of mining tycoon Sanjeev Gupta, was the main recipient of funding from Greensill, a UK finance company, which filed for bankruptcy last week.
Fitch assigned both a “BB-” rating to InfraBuild – formerly known as Liberty OneSteel – and a “BB” rating to its $ 325 million senior covered bonds due October 2024 on ratings of negative watch (RWN).
This means that debt and the company could face downgrading in the near future, following a similar warning from Moody’s last week.
“The RWN reflects the growing uncertainty surrounding the funding issues faced by GFG Alliance,” Fitch analysts said in a note.
“GFG Alliance’s problems could have a contagion effect on its various companies, including the steel mills of Whyalla and InfraBuild, and it could increase pressure on InfraBuild’s cash flow and disrupt the supply of billets and structural steel. . “
The contagion can result from a number of related party transactions under various agreements, analysts added.
InfraBuild did not immediately respond to a request for comment. A spokesperson for the GFG Alliance declined to comment.
Gupta said on Friday that the conglomerate was in talks with Greensill directors over a so-called standstill deal that would suspend payment of its debt to Greensill for an agreed period.
The supply chain finance company filed for bankruptcy last Monday after losing insurance coverage for its debt repackaging business and said in its court file that GFG Alliance has started to default on its debts.
InfraBuild’s bonds maturing in October 2024 fell 75 cents on the dollar to a spot price of 98.625 during the Fitch move, resulting in a yield of 12.488%.
Bonds were trading at 108.5 earlier in the month, yielding 8.268%.
The debt is secured by assets which have limited the fallout. InfraBuild’s loan documents and guarantees provide adequate protection to creditors, Fitch analysts said.
Fitch said he estimates that InfraBuild has adequate liquidity of A $ 250 million, which consists of cash and undrawn committed balances under an A $ 250 million asset loan facility at end of February 2021.
The facility matures in October 2022. In addition, InfraBuild does not have any credit arrangements or facilities related to Greensill. (Reporting by Abhinav Ramnarayan, editing by Carmel Crimmins and Alexander Smith)