Adani Pledge To Tackle Debt Deadlines Triggers Record Bond Jump
Executives of the embattled Adani Group told investors in a call that they will address deadlines to repay debt with options including private placement notes and cash from operations.
(Bloomberg) -- An Adani Group bond jumped the most on record Thursday after executives told investors they will address upcoming debt maturities, including by potentially offering private placement notes and using cash from operations.
The company’s management said it will come up with a plan to refinance Adani Green Energy Ltd.’s bonds due in 2024 by the end of June, according to people familiar with the matter. The bonds rallied 10 cents in their biggest daily rise since September 2021, when they were issued.
The debt will likely be refinanced with long-term private placement notes, with a potential maturity of 15 years, said the people, who spoke to Bloomberg on the condition of anonymity. Bloomberg News reported earlier on Thursday that Adani was considering privately placed bond offerings for some of its companies, including Adani Green Energy.
Adani’s management has been on a mission to reassure investors about the health of the group’s finances after a report by short-seller Hindenburg Research — accusing it of fraud and market manipulation — started a selloff in the conglomerate’s shares and bonds. Adani has called the charges “bogus.”
The management said on the call it is seeking to cut the group’s ratio of net debt to earnings before interest, taxes, depreciation and amortization to below three times next year, from currently 3.2 times, the people said. The group had previously said that its companies faced no material refinancing risk and had no near-term liquidity requirements.
Executives also said that $390 million of debt coming due over the next 12 months at the Adani Transmission Step-One Ltd. level will be repaid using cash from operations, the people said. Other bonds issued by Adani entities also registered gains after the comments.
Some Wall Street banks told clients earlier this month that Adani-related debt might be worth scooping up. Goldman Sachs Group Inc. and JPMorgan Chase & Co. executives said some Adani bonds offered value given the levels they were trading at and the strength of the company’s assets.
Still, concerns around Adani’s ability to access the capital markets following the Hindenburg report have been at the forefront of investors’ minds. Accessing the loan markets at the right price might present a challenge to the group, analysts at credit research firm CreditSights Inc. said earlier this month, adding that those markets wouldn’t be closed to Adani.
The cost of capital is a crucial aspect for the conglomerate, whose business interests range from ports to renewable energy. The Adani Group is a frequent issuer that in recent years has tapped the international markets to raise more than $8 billion worth of US-dollar denominated bonds. It also took out at least as much as that in foreign-currency loans, according to data compiled by Bloomberg.
A recent spike in yields for Adani-related bonds has stoked concerns that at least for now, debt financing would be prohibitively expensive for new bond deals. However, if the plans laid out by the company pan out, Adani might not need to tap the public capital markets to address its near-term debt maturities.
Traders at Goldman Sachs this month said that Adani debt had hit a floor, pointing to notes issued by Adani Ports & Special Economic Zone Ltd. They said they expect the entity would be able to refinance its bonds and potentially attract equity investors and sell assets.
Hedge funds and distressed debt specialists including Oaktree Capital Management and Davidson Kempner Capital Management have snapped up the group’s debt in recent weeks.
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