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Sanjeev Gupta is facing a new threat to his besieged metals business in Australia as a creditor targets one of his most valuable businesses for allegedly breaching the terms of its financing.
Investment firm FitzWalter Capital filed a lawsuit in New York on Tuesday against Sydney-based InfraBuild, requesting that a court declare a default had occurred and disclosing that it owns more than $50mn of the steel recycling business’s $550mn of bonds.
London-based FitzWalter claims Gupta’s historic borrowing from failed financing firm Greensill Capital triggered a “change of control” clause that required InfraBuild to offer to repay its bonds at a slight premium, and that the company’s failure to do so constituted a default.
The latest legal action against a Gupta-owned company comes after South Australia’s state government last week seized control of his Whyalla steelworks and forced it into administration, further destabilising a global metals empire beset by creditor lawsuits and a long-running criminal probe.
The lawsuit threatens what was long one of Gupta’s most profitable businesses and a key bargaining chip in his negotiations with creditors owed billions of dollars.
Gupta’s GFG Alliance announced this month that it was nearing a final settlement with creditors stemming from the collapse of Greensill, which disclosed when it filed for administration in 2021 that it had lent more than $5bn to GFG.
But that settlement hinges on GFG being able to release $350mn of cash trapped in an escrow account at InfraBuild. Citing the threat to the company’s financial stability, FitzWalter was also seeking an injunction on the company making any dividends.
“Once funds have been transferred away from InfraBuild,” FitzWalter claimed in the filing, “it may be impossible to recover them.”
InfraBuild told the Financial Times that the lawsuit was a “nuisance complaint with no foundation”, adding that it had not yet been served with any documentation in relation to the claim and would seek to have it dismissed.
“There has been no event of default as described in the complaint,” InfraBuild said.
InfraBuild has already come under intense financial pressure in recent months.
Moody’s downgraded the company’s credit rating this month to Caa2, many notches below investment-grade, citing a “weakening liquidity profile and deteriorating operating performance”. It also forecast that InfraBuild would probably “breach its financial covenants” on an asset-backed loan provided by US investment firms BlackRock and Silver Point Capital.
FitzWalter, a specialist in distressed assets, claims that the change of control clause has been triggered because GFG pledged its stake in InfraBuild to Greensill and then defaulted on the financing. GFG has long denied the validity of this share security, previously telling the FT that it was “disputed and has no legal basis”.
FitzWalter was founded in 2020 by a group of former senior Macquarie executives led by Ben Brazil, who previously oversaw the Australian bank’s in-house private debt unit.
The fund is no stranger to pursuing high-profile legal battles.
FitzWalter last year won a London High Court judgment against Vietnamese budget airline VietJet, which was found liable for “egregious” conduct and “long-standing” defaults in a long-running dispute over aircraft leases. VietJet is appealing against the ruling.
https://www.ft.com/content/6abc3e84-9746-4ee3-ac69-805ff15860a1
