Fitch, the rating company estimates InfraBuild’s downgrade would buffer the company’s liquidity and debt maturities. InfraBuild’s liquidity profile for its debt maturity in 2023 would result in refinancing difficulties giving further impacts. The refinancing is due in October 2024 giving the burden of the company to pay $325m.
Looking back in 2017, InfraBuild was a rebrand from Liberty OneSteel in 2019. Two years before, GFG Alliance acquired Arrium Group’s mining and steel business, in which later it was named Liberty OneSteel. InfraBuild today is a separate legal entity. GFG Alliance is independently financing InfraBuild. The US dollar senior secured notes include a covenant package containing a list of restricted payments.
Based on the strong construction demands in Australia, Fitch hopes that InfraBuild’s revenue and Ebitda could improve massively by the end of the financial year in June 2022. In other words, the construction demand leverages from the detached housing sector to a redirection of spending into housing from overseas travel. The large demand might help the company to survive from the latest downgrade.
But InfraBuild adjustment might remain below 2x over the next four year. This includes the Fitch adjustment and debt to Ebitda. Therefore the latest downgrade is similar to the previous move last December from Moody. Previously, the downgrade was InfraBuild’s corporate family and backed senior secured notes ratings to Caa1 from B3.
In this case, under Moody’s case, InfraBuild should at least create Ebit margins over 6% and should register debt-to-Ebitda around 2x. Ebitda interest covers around 3x for the financial end year. It is a vital move because InfraBuild is Australia’s sole electric arc furnace steel long-product manufacturer. It maintains the country’s second-largest ferrous and non-ferrous recycling business, said IFR Asia.
