As Adani Group plans to prepay share pledges, its US dollar bonds rally

Adani Group dollar bonds rallied on Friday as Gautam Adani was said to be in talks with creditors to prepay some loans in a bid to restore confidence in his business empire.

The notes also pared losses from earlier in the week as Goldman Sachs Group and JPMorgan told some clients that Adani bonds can offer value due to the strength of certain assets. Adani debt has hit a floor in the short term, Goldman Sachs trading executives said in a call Thursday, according to people with knowledge of the matter. 

All 15 dollar-debt securities of the group advanced on Friday, partly helped by news that Adani Ports & Special Economic Zone had made coupon payments on schedule.

The 2031 notes sold by Adani Ports, one of those which had a payment date on Feb 2, climbed 3.7 cents on the dollar to 67.7 cents during the day.

Adani Green Energy’s dollar bond maturing in Sept. 2024 rose 6.8 cents on the dollar to 70.4 cents, on course for its biggest daily increase on record, according to data compiled by Bloomberg.

Even so, some on the conglomerate’s dollar debt is trading at below 70 cents, a level which is typically considered distressed.  

Meanwhile, Adani is in talks with creditors to prepay some loans backed by pledged shares as he seeks to restore confidence in his sprawling conglomerate’s financial health, an Adani Group representative said on Friday that the company is in talks with creditors proactively, confirming an earlier Bloomberg report. While the official didn’t elaborate further, the move would see lenders release some of the stock pledged as collateral and repayment could take place as early as this weekend, said people with knowledge of the matter, asking not to be identified as the details are private.

The conglomerate, with interests spanning cement, media, ports and power, has pledged 5.5 per cent of its listed units’ shares overall in loans, the people said. 

While there’s been no suggestion that Adani Group entities would struggle to make dollar debt payments due soon — and the firm has flagged interest coverage ratios that show it has the ability to meet such obligations — the move is an attempt to restore confidence after some banks stopped accepting the group’s securities as collateral in client trades. 

However, the prepayment itself might not be enough to bolster confidence, according to Sameer Kalra, founder, Target Investing. Investors want “concrete plans and actions,” he said.

“The use of every rupee on the balance sheet is critical now. There are a lot of stakeholders.” 

Adani Group hasn’t faced margin calls on these pledges and is seeking the prepayment proactively, the people said.