Adani Ports reduces refinancing risk with $130 million bonds buyback, S&P explains why
- Adani Group-backed ports and logistics operator on Monday commenced a tender offer to purchase for cash up to $130 million in an aggregate principal amount of the outstanding 3.375% Senior Notes which are due in July 2024.
Adani Ports has commenced its $130 million buyback of bonds, and S&P Global Ratings believe this tender should reduce the company's refinancing risk. However, S&P on Tuesday said, the final buyback amount will depend on its liquidity position and market conditions.
In its latest report, S&P said, "Adani Ports and Special Economic Zone Ltd.'s announced bond tender should reduce its debt well ahead of its $650 million 3.375% senior unsecured notes maturing in July 2024."
Adani Group-backed ports and logistics operator on Monday commenced a tender offer to purchase for cash up to $130 million in an aggregate principal amount of the outstanding 3.375% Senior Notes which are due in July 2024.
The purpose of this bond buyback offer is to partly prepay Adani Ports' near-term debt maturities and to convey the comfortable liquidity position of the company.
The tender offer will expire on May 22, 2023.
According to S&P, the final buyback amount will depend on its liquidity position and market conditions. Adani Ports will complete the first tranche of up to $130 million using its cash reserves.
If accepted by investors, S&P said that the transaction will facilitate Adani Ports' strategy to reduce refinancing risks.
S&P sees the tender offer as an opportunistic exchange, reflecting the company's proactive management of upcoming debt maturities in advance.
After the completion of this offer, Adani Ports expect $520 million notes to remain outstanding. Post the transaction, the company plans to offer to purchase for cash approximately $130 million of the outstanding notes in each of the next four quarters.
The American rating agency expects Adani Ports to have a sufficient cash balance to repay $130 million of the notes. It added. "the company will capitalize on its healthy operating cash flow, which we project at ₹89 billion for fiscal 2024."
For fiscal FY24, the rating agency has predicted a CAPEX of about ₹60 billion for Adani Ports. S&P believes that the company should have adequate liquidity over the next 12 months ending March 31, 2024.
In S&P's view, Adani Ports will remain flexible with Capex, adjusting it according to business performance and funding availability.
Also, S&P expects Adani Ports to maintain robust EBITDA margins of 55%-60% over the next two fiscal years, underpinned by a stable operating performance.
However, S&P has maintained its negative rating outlook on Adani Ports -- which reflects the risk of an adverse impact on its credit profile from governance risks and funding challenges for the larger Adani group.
Adani Ports' share price closed flat on BSE to ₹671.40 apiece on Tuesday with the buyback program of the bonds in focus. The company's market cap is over ₹1.45 lakh crore.
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First Published:25 Apr 2023, 09:11 PM IST
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