Metals tycoon Sanjeev Gupta has held talks with JPMorgan to launch the first high-yield bond backed by part of his sprawling industrial empire, after plans for a stock market flotation of his Australian steel division foundered. The former commodities trader turned self-styled industrialist had been aiming for an initial public offering of part of the mining and steel outfit previously known as Arrium, bought out of administration in 2017 through the GFG Alliance, an umbrella grouping of his family’s business interests.
GFG had sought to list the recycling, distribution and construction products assets, which were recently rebranded as InfraBuild, while keeping hold of the mining and blast furnace operations. But with the float plans now shelved, the group is considering offering a high-yield bond at InfraBuild and has approached JPMorgan to manage the process, according to people familiar with the matter. It would look to raise at least $500m through the debt sale, said a source.
“We are always open to capital market transactions as part of our broader strategy,” GFG said. A bond issuance would test investor appetite for GFG Alliance, a loose collection of Gupta family interests spanning metals, manufacturing, power and banking. Gupta’s empire has grown rapidly through deals but attracted scrutiny over its finances. It comes as Gupta’s Liberty House group is locked in a dispute with mining company Rio Tinto over the final payment for the $500m purchase of Europe’s largest aluminium smelter.
Concern exists among lenders who provided a $350m loan to finance the Dunkirk smelter last year, as the borrower has breached several terms of the loan. While Dunkirk has not missed any scheduled payments, some of these breaches relate to issues such as delayed filing of audited accounts for the smelter business, according to people familiar with the matter.
According to Australian press reports, Gupta has approached the country’s federal government about financial assistance for the Whyalla steelworks, a blast furnace plant that produces the metal from raw materials and is separate to InfraBuild. A bond deal would also be the first time a major credit rating agency has assessed the strength of one of GFG’s underlying businesses. While Moody’s rated £295m of bonds issued to back the 2016 acquisition of a smelter and hydroelectric power assets in Scotland, it received the same credit rating as the UK government because of a guarantee from the devolved Scottish administration.
The Scottish bond deal was the brainchild of Australian financier Lex Greensill, a close confidant of former UK prime minister David Cameron, whose eponymous finance firm Greensill Capital bagged an $800m investment from SoftBank’s Vision Fund in May. GFG has to a large extent relied on funding arranged by Greensill, which often raises debt against assets linked to unpaid invoices or supplier payments. Greensill bonds linked to Gupta’s businesses were at the centre of Swiss asset manager GAM’s frozen fund scandal last year. The Indian-born businessman repaid the remainder
of this hard-to-sell debt in July, allowing the Zurich-based group to fully return cash to investors. One of the purposes of the new high-yield bond would be to repay existing debt secured on assets at InfraBuild, which was raised earlier this year at a double-digit annual interest rate, said people familiar with the matter.
