JP Morgan overweight on some Adani group bonds

JP Morgan Securities has said it is overweight on four adani group bonds, of which three have been issued by Adani Ports and Special Economic Zone and one by Adani Electricity Mumbai. It also said it was neutral on other five Adani group bonds and was underweight on a bond issuance by Adani Green Energy,

In late November the US prosecutors, the US Department of Justice and the Securities and Exchange Commission, separately indicted senior officials connected with Adani Green for alleged bribery in connection with solar energy contracts in India.

The US investment bank noted that the bonds issued by the group have gone through a period of liquidity after the news of the indictment, but the spreads have now settled. “Overall, across key listed businesses of the group, we do not see any signs of stress.”

It pointed out that the group companies’ liquidity needs seemed manageable with only Adani Green having $1.1 billion worth of bonds due in March 2025. The other entities with offshore debt are Adani Ports, Adani Airport Holdings and Ambuja Cement.

In the case of Adani Ports, which has about 82 per cent offshore debt, JP Morgan observed that most of its debt was unsecured. In terms of security it had the least share of secured debt with about 77 per cent of the total debt as of FY24 being unsecured.

In the near term Adani Ports has upcoming offshore debt repayments coming up in January to the extent of $290 million. Ambuja Cement has $300 million coming up in March next, while Adani Airport Holdings has $250 million coming up in May 2025 and $150 million in September 2025.

With reference to the concerns raised by investors on the unsecured nature of Adani Ports’ offshore debt, JP Morgan said that it favored cash flows over security largely. It said that decent distribution is allowed under covenants and cash cannot be treated entirely as trapped while it had comfort from the fact that Adani Ports had the ability to scale and grow using internal cash flows.

The upcoming payment of Adani Ports in January is backed by a pledge of Haifa Port and JP Morgan said that the loans would be refinanced by local banks or financial institutions in Israel.

Bonds issued by other Adani group are secured and have covenants including cash flow waterfall mechanism, distributions linked to graded debt service coverage ratio, which offer protection from cash leakage out of project companies, it said.



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