The Dual Narrative of Adani: Bond Buybacks and Moody’s Negative Ratings

Moody’s Investors Service has recently altered its outlook on four companies within the Adani Group, shifting from ‘stable’ to ‘negative’. This change in outlook affects Adani Green Energy, Adani Green Energy Restricted Group, Adani Transmission Step-One, and Adani Electricity Mumbai. Despite this, Moody’s has maintained its ratings on all eight Adani group companies, keeping the outlook stable for Adani Ports and Special Economic Zone, Adani International Container Terminal, Adani Green Energy Restricted Group, and Adani Transmission Restricted Group 1​​.

The negative outlook for Adani Green Energy is primarily due to its large capital spending program and reliance on sponsor support, which may include subordinated debt or shareholder loans. This change also considers the company’s significant refinancing needs of around $2.7 billion for the fiscal year ending March 2025 and limited headroom in its credit metrics to manage any material increase in funding costs​​.

In the case of Adani Electricity Mumbai, the negative outlook reflects a probable reduction in funding access and a decreased ability to manage any substantial increase in funding costs, given the limited headroom in its credit metrics under Moody’s base case scenario. The outlook change for Adani Green Energy Restricted Group also factors in the refinancing risk associated with $500 million of bonds maturing in December 2024. However, Moody’s recognizes that the project finance structure of Adani Green Energy Restricted Group offers protection from any contagion risk from the broader Adani Group​​.

Moody’s assessment of Adani Transmission Step-One’s senior secured bond ratings reflects its close credit linkage with its wholly-owned parent, Adani Transmission, due to the parental guarantee over the rated bonds and the event of default provisions linked to Adani Transmission’s solvency. This reflects the predictable revenue from its diversified portfolio of quality regulated or contracted transmission and distribution assets, as well as the group’s aggressive growth strategy and the incremental debt required to fund its capital spending​​.

Adani Electricity Mumbai Limited, a subsidiary of Adani Energy Solutions, has announced a tender offer to buyback up to $120 million of its outstanding 3.949% bonds due in 2030. The offer is set to expire on December 13, 2023, with an early deadline date of November 30. The purchase price is pegged at $850 per $1,000 in principal before the early deadline. This buyback initiative will be funded through internal accruals and cash surplus, with the goal of demonstrating the company’s strong financial stability and liquidity position​​​​​​​​​​.

This decision by Adani Electricity to buy back its bonds and the Moody’s negative outlook on several Adani companies indicate a complex financial situation for the conglomerate, balancing efforts to maintain financial stability and liquidity while managing significant capital expenditures and refinancing needs.



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