Most Adani Dollar Bonds Exit Distressed Levels on Debt Promises

Published 17 February 2023, 05:14:24.274 GMT

(Bloomberg) -- Most Adani Group dollar bonds have climbed further out of distress after the conglomerate said it will address upcoming maturities, the latest boost to investor sentiment following an initial rout sparked by a US short-seller report.

Among the gainers were Adani Electricity Mumbai Ltd.’s dollar 2031 notes, which rose 0.7 cent to 72 cents as of 1:07 p.m. in Hong Kong. Just three of 15 Adani Group US currency notes are below the 70 cents on the dollar level that’s generally considered as being distressed. Most Adani-linked shares advanced as well on Friday.

The rebound in the bonds indicates that investor concerns about the group’s credit quality may be easing, after a tumble that saw all but two issues fall below 70 cents in recent weeks and a plunge in an Adani Ports & Special Economic Zone Ltd. note to as low as 58.9 cents. Still, yields remain elevated on even the group’s investment-grade US-currency bonds, suggesting that the conglomerate may need to pay steep premiums to sell new debt.

“We need to see how they refinance their debt,” said Kranthi Bathini, director at WealthMills Securities Pvt. “I don’t see it as a cakewalk but they seem pretty confident they can clear the debt obligations. Whatever small debt obligations they have, they are already clearing that.”

The management said on the call Thursday it is seeking to cut the group’s ratio of net debt to earnings before interest, taxes, depreciation and amortization to below three times next year, from the current 3.2 times, people familiar with the matter said. The group had previously said that its companies faced no material refinancing risk and had no near-term liquidity requirements.

“Management’s commitment to reduce leverage and seek alternative options for refinancing has helped to assuage investor concerns,” said Leonard Law, a senior credit analyst at Lucror Analytics. “That said, the situation could remain fraught as the group faces substantial negative headline risk.”

By Finbarr Flynn

--With assistance from Ayai Tomisawa and Ishika Mookerjee.