Adani Ports starts 1st ever bond buyback

This buyback assumes significance in the backdrop of a widespread concern among investors about the group’s liquidity position after the Hindenburg Research report.

Mayur Bhalerao, Anirudh Laskar
Updated25 Apr 2023, 12:50 AM IST
Cash reserves will be used to fund bond repurchase
Cash reserves will be used to fund bond repurchase(Photo: Bloomberg)

Adani Group’s cash-rich ports and logistics arm Adani Ports and Special Economic Zone Ltd, on Monday, announced a buy-back of up to $130 million of the company’s outstanding bonds in an attempt to comfort investors and creditors about the group’s liquidity position that came into question after a scathing report by US-based short-seller Hindenburg Research on 24 January.

This is the first ever buyback of bonds by Adani Ports and it assumes significance in the backdrop of a widespread concern among investors about the group’s liquidity position after the Hindenburg Research report.

Bonds worth around $650 million issued overseas by Adani Ports, will mature next year, and the company, plans to buy back all these bonds in tranches at least once in every coming quarter, according to a release by the company.

The $130 million buy-back will be for bonds that bear a coupon of 3.375%. Adani Ports has bonds with varying coupon rates for $650 million.

The company said on Monday that it will fund the repurchase of the bonds with its cash reserves. Adani group has a cash reserve of at least 61,200 crore as at the end of FY2023, and a majority of this is in the books of Adani Ports.

After the Hindenburg Research report, the group, at one point, had lost $145 billion worth of investor wealth. Even after a marginal recovery, stocks of all Adani listed firms are still trading under pressure on exchanges. And, this is why Adani group has been taking several measures to alleviate investor concerns.

On 18 April, Mint reported that Adani, during the just-concluded March quarter, paid $3 billion to release promoter pledges in group firms and repay bonds. The Adani group has significantly lowered its promoter-group pledges and settled bonds with three domestic mutual funds by using the proceeds from the $1.88 billion equity funding by GQG Partners and an additional $1 billion from promoter-group funding. Adani’s move to lower share-pledge levels and prepay debts has checked the free fall in the group’s stocks. The group spent at least $2.54 billion to cut promoters’ pledges in four of the nine listed companies.

They are Adani Enterprises Ltd, Adani Ports and SEZ Ltd, Adani Transmission Ltd, and Adani Green Energy Ltd.

On Monday, Adani Ports said the purpose of the bond-buyback offer is to partly prepay the company’s near-term debt maturities and to convey the comfortable liquidity position of the company.

Adani Ports has appointed Barclays Bank PLC, DBS Bank Ltd, Emirates NBD Bank PJSC, First Abu Dhabi Bank PJSC, MUFG Securities Asia Ltd Singapore Branch, SMBC Nikko Securities (Hong Kong) Ltd and Standard Chartered Bank to serve as dealer managers for the bond buyback.

Following the upcoming buyback, which is expected to be completed before May end, at least $520 million worth of bonds of Adani Ports will remain as outstanding, which the company intends to refinance.

“The company may choose to either accelerate or defer this plan subject to its liquidity position and market conditions, with pricing to be announced separately for each of the tranches,” said the release.

Adani group’s total debt stands at around 2.27 trillion as on 31 March and gross assets stood at 3.91 trillion.

Since the $130 million bonds are issued overseas, the repurchase offer will be open for the bondholders until 1700 hours New York time, on 22 May 2023.

The company will offer a premium called “early tender premium” for bondholders who tender their bond holdings before 8 May 2023.

“The total consideration for each $1,000 principal amount of notes (bonds) purchased pursuant to the tender offer will be $970 per $1,000 principal amount of notes…validly tendered at or prior to 5:00 p.m., New York City time, on 8 May, 2023 (the “early tender date”),” said the company.

Ever since the Hindenburg Research report broke, the company has been stating to its creditors that there is no material refinancing risk and near-term liquidity requirement for any Adani group firm as there is no near-term significant debt maturity outside the credit envelope.

About 39% of Adani group firms’ debt exposure is through bonds (mostly overseas). Around 29% of the group’s overall loans are from global international banks and about 32% exposure in debts is from domestic PSU lenders, private banks and NBFCs.

Adani Ports traded marginally high at 662.23 apiece on the NSE on Monday.

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First Published:25 Apr 2023, 12:50 AM IST
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