Adani Group Breaks New Ground with Debut Dollar Bond Post Hindenburg Controversy

Adani Group has initiated the marketing of a $409 million bond, marking its debut in the dollar bond market since facing allegations from the short seller Hindenburg Research last year. The move reflects a positive shift in investor sentiment toward the conglomerate.

The bond offering, spearheaded by Adani Green Energy Ltd., a subsidiary focusing on solar energy, along with affiliated entities, aims to raise funds over an 18-year period. Initial reports suggest that the bonds are being marketed with an indicative interest rate hovering around 7.125%. Sources close to the matter, speaking on the condition of anonymity due to the sensitivity of the issue, disclosed this information.

For Adani Group, this venture into the dollar bond market marks a pivotal moment, reflecting its efforts to regain investor trust and dispel concerns about its ability to access international capital markets following the turmoil sparked by Hindenburg Research's accusations. Despite vehemently denying the allegations, Adani Group faced a period of uncertainty, which led to a decline in the stock and bond prices of its various subsidiaries.

However, recent developments, including fresh equity injections from investors such as GQG Partners LLC and successful debt refinancing activities totaling $3.5 billion for cement company acquisitions, have contributed to a gradual recovery in Adani Group's securities.

The response to the bond offering has been promising, with demand exceeding $1 billion as of midday in Asia on Monday, according to sources familiar with the matter. Lakshmanan R, head of South & Southeast Asia corporates at CreditSights, expressed optimism about the potential demand for the bonds, suggesting that Adani Group may not need to offer significant premiums.

Analysts, including Eric Liu from Nomura Holdings Inc., have assessed the fair value of the new bonds at approximately 6.825%. Despite the challenges posed by Hindenburg Research's allegations, Adani Group remains steadfast in its denial of any wrongdoing.

The proposed rating for the bonds, expected to be in the Ba1/BBB- range, indicates a comparable spread to Adani Group's existing bonds, assuming they are priced within the initial guidance. The proceeds from the bond sale are earmarked for redeeming $500 million of notes maturing in December, thereby mitigating refinancing risks.

Fitch Ratings has expressed confidence in the longer maturity and structure of the new bonds, assigning them a rating of BBB-, higher than the debt they are intended to replace. Notably, major asset managers, including Neuberger Berman Group LLC, have shown renewed interest in Adani's dollar bonds, while Temasek Holdings Pte, a state-owned investor from Singapore, has divested its position.

The involvement of reputable financial institutions, such as Deutsche Bank AG and Barclays Plc, in facilitating the bond deal underscores the continued confidence of major lenders in conducting business with the Indian conglomerate.

Also Read: Hindenburg's Actions Lead to $99 Billion Wealth Erosion Among Three Billionaires in 2023