Sanjeev Gupta’s Australian steel business tests bond investor interest

Sanjeev Gupta’s Australian steel business has been sounding out investors about a bond sale, in a big test of whether institutions are willing to lend to the metals magnate in spite of ongoing criminal investigations of his business empire.

Executives from metal recycling and distribution business InfraBuild met bond fund managers in New York last week, the first time one of Gupta’s companies has met a broader group of investors since the collapse of his main lender Greensill Capital plunged his businesses into crisis in 2021.

While the investor meetings — which continue in London this week — are not a formal bond roadshow, the company and its bankers at Jefferies have been informally sounding out investors on a potential bond issue, according to people familiar with the meetings.

Investors have been asked whether they would consider buying a new US dollar bond at a yield of about 14 per cent, the people added, with the company targeting a deal as large as A$1bn ($670mn). 

They said the higher yields were being offered to compensate for the reputational risks of lending to a company owned by Gupta, whose GFG Alliance group of companies is under criminal investigation in the UK and France.

InfraBuild has told investors it does not believe it is a target of these investigations.

Investors have long seen InfraBuild as one of GFG’s stronger businesses — and unlike many other companies in the group it has its accounts audited by a Big Four firm — but several investors told the Financial Times they were unwilling to lend to the company.

“The underlying business is not horrible, it’s just I don’t want to walk into the office one day and have the wrong kind of headlines,” said one New York-based bond fund manager. “It’s just not worth my time.”

GFG said: “InfraBuild continues to perform strongly and has secured the backing of top-tier investors for its growth plans.”

InfraBuild did recently secure a $350mn asset-backed loan from US funds BlackRock and Silver Point.

A new bond deal would be used to refinance InfraBuild’s outstanding $325mn bond and also to raise money for a potential acquisition of Gupta’s US steel business.

This deal would also release money for Gupta to repay some of the billions of dollars still owed to Greensill Capital investors who bought packaged up loans to his companies, according to two people familiar with the plans.

It would not be the first time InfraBuild has purchased assets from its owner, having bought smaller metal recycling businesses in the US and Poland from Gupta in 2021.

InfraBuild’s first bond offering in 2019 struggled to attract demand. Even after the company scaled back the bond by one-third to $325mn, the company had to offer a 12 per cent interest rate to attract investors.

While that deal allowed InfraBuild to move away from using financing from Greensill, weeks before Greensill collapsed it filed documents indicating that it had taken security over InfraBuild’s entire share capital.

GFG told the FT that this share security was “disputed and has no legal basis”, however, because it was conditional on Greensill advancing “substantial facilities” that “did not materialise”. 

InfraBuild transacts with other companies in Gupta’s wider group — for example, purchasing steel billets from the Whyalla Steel Works — and its accounts for the year ending June 2022 show that it booked A$612mn of purchases from and A$78mn of sales to related parties. 

Gupta’s use of related party transactions has drawn scrutiny elsewhere. The Bank of England censured his UK lender Wyelands Bank for “wide-ranging significant regulatory failings” earlier this year after an investigation of the bank’s extensive lending to Gupta’s companies.