Hundreds of millions flow from InfraBuild to Gupta steel empire

The related company transactions are disclosed in documents circulated to potential bondholders last week when InfraBuild sought $US350 million ($550 million) in debt to cover the repayment of $US325 million next year.

They show a shared services agreement with Mr Gupta’s other companies – for “general corporate services, personnel secondment, financial services, information technology services, human resources and procurement services” – has cost InfraBuild $109.2 million in three years. In addition, a corporate services agreement – for “certain corporate services from GFG Alliance” – has cost the company $48.2 million in the last two years.

InfraBuild declined to provide details of those agreements, or to confirm whether the purchases of materials was at market prices.

There have also been other purchases from Mr Gupta’s companies. One, in August, was for the purchase of a scrap metal processing operation in Louisiana. InfraBuild paid GFG Alliance $US2.5 million for the facility.

The company has made no secret that it wanted to spend significant funds buying assets from Mr Gupta’s companies in the United States, despite having total debts of $1.48 billion and few operations outside Australia.

With the successful launch issuance of the new bonds late on Friday – which came only months after it secured a $US350 million asset-backed loan from BlackRock, the North American asset management giant, and Silver Point Capital, which specialises in distressed debt – InfraBuild could proceed with the purchase of three GFG Alliance operations in the US.

They include Keystone Consolidated Industries, which runs an electric arc furnace, rolling mill and wire mill in Peoria and mesh manufacturing sites in Ohio and Mexico, and Johnstown Wire Technologies, which runs plants in Pennsylvania and Ohio. The third is the Georgetown steelworks in South Carolina. Those purchases were announced in November last year.

“We will be building on our core competencies, expanding our existing US operations, diversifying our revenue streams and gaining exposure to the growing US infrastructure market,” the company said at the time.

In Europe, the disclosures show, GFG Alliance subsidiary Liberty Poland has been unable to pay for scrap metal supplied by InfraBuild since September last year. At June, Liberty Poland still owed InfraBuild $50 million.

There are also an array of loan agreements between InfraBuild and GFG Alliance companies, including $39.1 million owed to the company by Mr Gupta’s Liberty Holdings Australia. InfraBuild has also agreed to make $25 million in loan facilities available to Liberty Steel Holdings USA.

Mr Gupta’s businesses have been working to stave off creditors, including in Romania where his steelworks face insolvency claims from suppliers, the Financial Times reported last month. Both the Romanian business and Liberty Poland have been affected by Russia’s invasion of Ukraine, which has sent energy costs higher and created volatility in demand for steel.

Separately, ArcelorMittal is pursuing Mr Gupta’s companies for the payment of €140 million ($234 million) related to the sale of the steel plants in Romania, the Czech Republic and other European countries to the businessman’s Liberty Steel.

Last week, ahead of the successful launch of the new bond, Fitch Ratings said it had a negative outlook on InfraBuild’s debts.

“If the issuance is successful, InfraBuild plans to use its $US350 million asset-backed term loan in escrow to fund a distribution to GFG Alliance,” Fitch analyst Janani Ganapathy said. “We believe the distribution will be split across a dividend and a related-party loan.”