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Published: Feb 17, 2023
Updated: Feb 17, 2023

Adani Group's Debt Woes: Management Reveals Plan to Refinance with Private Notes and Cash

The Adani Group, a conglomerate with business interests ranging from ports to renewable energy, has been grappling with debt repayment deadlines. The group recently held a call with investors, where its management shared plans to address the situation using various options, including private placement notes and cash from operations.

Refinancing Adani Green Energy's Bonds

According to sources familiar with the matter, the management will come up with a plan to refinance Adani Green Energy's bonds due in 2024 by the end of June. The announcement caused the bonds to rally, with the debt likely to be refinanced with long-term private placement notes with a potential maturity of 15 years.

Cutting Net Debt to Below 3 Times EBITDA

During the call, the management stated that it was seeking to cut the group's net debt to below three times EBITDA (earnings before interest, taxes, depreciation, and amortization) next year. This move is aimed at reducing the group's reliance on debt financing and improving its financial health. Currently, the group's net debt is at 3.2 times EBITDA.

Repaying Debt with Cash from Operations

The management also revealed plans to repay $390 million of debt coming due over the next 12 months at the Adani Transmission Step-One Ltd level using cash from operations. This move is likely to alleviate concerns among investors and analysts about the group's liquidity.

Debt Financing Costs Spike

The Adani Group's finances have come under scrutiny after Hindenburg Research accused it of fraud and market manipulation. Although the group denies the charges, the spike in yields following the allegations has raised concerns among investors and analysts that debt financing costs for new bond deals would be prohibitively expensive.

Adani Green Energy Bonds Rally

Despite the concerns, Adani Green Energy notes are currently quoted at around 86 cents on the dollar, having jumped by about eight points following the refinancing news from the call. This rally suggests that investors are optimistic about the group's ability to address its debt obligations.

Steps to improve investor confidence amidst fraud allegations

The Adani Group's recent call with investors reveals that it is taking steps to tackle its debt woes by using private notes and cash from operations. The move to cut net debt and refinance bonds is aimed at improving the group's financial health and reducing its reliance on debt financing. While the group has faced accusations of fraud and market manipulation, the rally in Adani Green Energy notes indicates that investors remain hopeful about its future prospects.