Synopsis:
KPMG has flagged concerns for InfraBuild's financial stability if it fails to secure a crucial $US350 million financing deal. The company seeks this funding to manage debts due next year and sustain operations, reports AFR
Article:
KPMG, the auditor for Sanjeev Gupta’s InfraBuild, has raised alarms over potential "material uncertainty" concerning the Australian steel group's future. This concern hinges on InfraBuild's success in completing a substantial $US350 million financing offer, essential for refinancing debts due at the end of the next year.
The financing in question, handled by Jefferies, involves issuing $US350 million senior secured notes. InfraBuild aims to utilize these funds to cover $325 million in bonds maturing in the latter part of the next year. This strategic financial move is pivotal for InfraBuild, previously known as OneSteel and Smorgon Steel, to continue its operations without financial hiccups.
InfraBuild has been navigating choppy financial waters since the 2021 collapse of Greensill Capital, the primary financier for Gupta’s GFG Alliance, which includes several steel mills and the Whyalla steelworks in South Australia. Amid these challenges, InfraBuild is looking to reinforce its financial foundations, having been compelled to refinance around $5 billion that was previously sourced from Greensill.
KPMG partner Kristen Peterson, upon reviewing InfraBuild's latest financial statements, stressed the gravity of the situation. The company’s recent reports have shown a decline in net profit after tax by 16 percent to $240 million. Despite this, InfraBuild maintains that its operations are robust, supported by strong financial results and solid working capital outcomes.
The broader GFG Alliance continues to face scrutiny from ratings agencies like Moody’s, which have voiced concerns over potential negative spill-over effects from other GFG entities.
InfraBuild, however, remains a strong performer within the GFG portfolio. It is now crucial that it secures the proposed bond issue to prevent any disruption to its business model and operations.
Conclusion:
InfraBuild's quest for a $US350 million financing deal is a crucial juncture for the company's future viability, as outlined by KPMG. The successful acquisition of these funds is imperative for InfraBuild to manage impending debt maturities and maintain its operational integrity. The steel distribution group's stability is under scrutiny as it navigates a complex financial landscape, with its next moves being closely watched by industry observers and financial institutions alike.
