Adani Green Energy is considering launching a US$500m private placement of US dollar bonds in Reg D format after it pulled a US$600m public bond deal on November 21 on news that Adani Group executives had been indicted in the US for participating in an alleged bribery scheme.
“We have a proposal from global private investors and they are willing to double the size of their investment for a private placement,” Adani Group chief financial officer Jugeshinder Singh said on November 29 on the sidelines of a debt capital market event in Mumbai.
The Reg D format would allow the company to sell securities in the US without having to register the deal with the Securities and Exchange Commission.
The private placement, which is targeted for completion before February 15, will refinance a US dollar loan raised for the construction of an Adani Green Energy facility. The notes may have the same features as Adani Green’s pulled US dollar bond offering, which had a 20-year door-to-door tenor and a weighted-average life of approximately 13.09 years. The cost of the borrowing is expected to be 30bp higher than the 7.45% yield at which the pulled bonds were due to price, Singh said.
BlackRock is heard to be one of the investors showing interest in the private placement. The US investment manager did not reply to an email seeking confirmation of its interest.
The facility being refinanced is a US$1.35bn four-year green loan, of which US$1.1bn is due in March. Singh said US$200m will be paid in cash, US$500m from the private placement and US$400m from a long-tenor loan with a state-owned lender or a foreign bank with a rupee balance sheet.
However, credit analysts remain sceptical that Adani Green will be able to sell US dollar bonds through a private placement.
“In our view, there is lack of clarity on how the US indictment charges will unfold. We believe that it will take time before investors’ confidence in Adani instruments is restored, and that corporate governance matters will remain a key concern for investors,” Tanvi Arora, high-yield bond analyst at Lucror Analytics, said in a note on Monday.
Adani Green’s US dollar bonds due in 2042, which were issued in March, were bid on Wednesday at a cash price of 85.50, up 6.5 points after touching a low of 79 on November 25.
Public market comeback
Adani Group is looking to come back to the public US dollar bond market by April to June next year, once its companies have made appropriate disclosures, Singh said.
“Until the individuals [who are charged] file their cases, and once there is clarity, then the companies can make appropriate public disclosures in their offering circulars,” he said. “The companies have to file material non-price, non-public information differences” in the offering circulars, Singh said. He noted that new Department of Justice officials will take up their positions after president-elect Donald Trump is sworn in on January 20.
Charges
On November 21, Adani Group chair Gautam Adani and seven other defendants, including his nephew and executive director of Adani Green, Sagar Adani, were indicted in a federal court in New York in relation to allegedly agreeing to pay more than US$260m in bribes to Indian officials to obtain power supply contracts in a scheme that began “in or about 2020”, according to the indictment. The SEC has also brought a civil suit that alleges the company raised more than US$175m from US investors from a US$750m bond in September 2021 while the alleged bribery scheme was in place.
Adani Group has denied the charges and called them “baseless”.
According to the DoJ indictment, FBI special agents on March 17 2023 seized electronic devices from Sagar Adani while executing a search warrant. At the same time they served him with the warrant, which identified the offences, people and entities under investigation by the US government.
The group’s subsequent disclosures to international lenders did not make this clear, and some bankers think that, and other communications between the borrower and financial institutions, gives them grounds to call in their loans.
In response to questions on international banks turning cautious on new lending or calling in their existing lines, Singh said lenders are ready to fund new Adani Group business and have not indicated any plans to pull loans.
“Disbursals will happen based on individual businesses. Today [November 29] also there was a disbursal, roughly US$200m, and it will continue based on the utilisation request of the companies,” he said.
Rupee bonds
Meanwhile, Adani Group will continue to tap the rupee bond market after the successful debut public issue by Adani Enterprises and private placements of bonds this year, said Singh.
Adani Airport Holdings has raised Rs18.5bn from bonds that were partly placed with mutual funds, Adani Enterprises has sold Rs8bn of maiden bonds to retail investors, and Adani Ports and Special Economic Zone has sold Rs5bn of bonds to institutional investors. Other deals have included issuance by special purpose vehicles of Adani Road Transport and other units.
“Our objective over the last four years is to maximise the participation of retail investors and we will do a few domestic transactions in the next nine to 12 months,” Singh said.
Adani Group’s infrastructure assets have lifespans of 30 to 60 years, which cannot easily be matched by equivalent durations in the domestic capital market. “Our only concern is the duration risk. If we can manage the duration risk, our preference is to raise more rupee borrowings, since we will not have to hedge it,” he said.
“For duration, we have to look at some of the US-based lending from banks and capital markets,” Singh said.
Adani Group has around US$3bn of debt maturing over the next 12 months and cash of US$6.3bn to repay it, said Singh. Acquisitions that have already been announced by the group and any planned capex will not be put on hold, he said.
Source: IFR
