Feb 4, 2023
Adani Bondholders Turn to Advisers as Crisis Engulfs Indian Firm
(Bloomberg) -- Bondholders of Adani Group firms are holding initial conversations with financial advisers and lawyers to weigh their options after the unfolding crisis at the Indian conglomerate sent several dollar obligations into distressed territory.
Investors are seeking guidance about how the sprawling group’s debt structure would be impacted under various scenarios, including the prospect for regulatory and legal redress, after short-seller Hindenburg Research leveled accusations of corporate malfeasance against the Adani Group, according to people familiar with the matter.
Debt investors are contemplating heavy losses on their holdings if Gautam Adani is unable to restore confidence and stem the losses in his industrial empire. The group’s stocks suffered a more than $100 billion selloff after Hindenburg published its bombshell report on Jan. 24.
Read More: Inside the 19-Hour Meltdown That Junked Adani’s Share Sale
Bondholders are looking for advice on the capital structure of the various companies in Adani’s industrial empire, the seniority of various obligations and their recourse in the event regulators step up investigations, said the people, who declined to be identified as they are not authorized to speak publicly about clients.
Discussions are at the initial stage and creditors have not started to organize, according to the people. New investors are also making inquiries about potential opportunities, they added.
An Adani Group representative did not offer any immediate comment.
Adani has repeatedly denied Hindenburg’s allegations of corporate wrongdoing and threatened legal action. The billionaire said in a video this week that his companies have an “impeccable” track record of fulfilling their debt obligations.
Several securities issued by Adani Group companies have fallen sharply this week to levels typically consistent with financial trouble. Adani Ports and Special Economic Zone Ltd’s August 2027 bonds dropped to around 71 cents on the dollar and Adani Green Energy’s September 2024 obligation fell to some 64 cents at one point. They have since rebounded amid constructive calls from some sell-side strategists.
Flagship company Adani Enterprises Ltd. shelved a plan to raise as much as 10 billion rupees ($122 million) via its first-ever public sale of bonds following the market rout, according to people familiar with the matter.
While Adani Ports and Special Economic Zone Ltd. was said to have met its bond obligations on Thursday, other tests loom. On Friday, it was reported that India’s Ministry of Corporate Affairs has started a preliminary review of Adani Group’s financial statements.
Goldman Sachs Group Inc. strategists, meanwhile, said they don’t see wider contagion to other Indian companies from the issues faced by the group, which is the parent for the likes of Adani Green Energy Ltd. and Adani Transmission Ltd.
Bondholders typically consult lawyers, bankers and advisers when a company’s financial prospects weaken so they can familiarize themselves with potential losses and remedies if the firm struggles to pay its debts. Solutions can include the company asking creditors to waive penalties, buying back bonds and loans, or swapping them for new debt with easier terms. The process includes trying to gauge how strong a claim the holders have on assets backing their securities in case the company defaults.
--With assistance from Harry Suhartono, Rick Green and P R Sanjai.
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