Adani's MIAL taps Apollo for funds
Companies from India's Adani Group continue to raise funds from offshore and onshore bond issues, attracting top global investors despite a legal case in the US.
Mumbai International Airport garnered US$750m from a private placement of bonds to funds managed by Apollo Global Management, affiliates and other long-term investors to refinance debt, Apollo said in a statement on June 24.
BlackRock-managed funds and Standard Chartered also participated, Adani Group said in a release. MetLife Insurance was among the other investors, sources said, and part of the Apollo investment came through Athene Annuity and Life Company, its retirement financing business.
Athene, BlackRock, MetLife and Standard Chartered did not reply to emailed queries.
MIAL, a subsidiary of Adani Airports Holdings, is the operator of Chhatrapati Shivaji Maharaj International Airport, the second-largest airport in India. AAHL holds 74% of the public-private venture and Airports Authority of India 26%.
The refinancing is one of the largest private investment-grade rated deals in India’s infrastructure sector.
It came shortly before group chairman Gautam Adani announced at an annual general meeting on the same day a plan to spend US$15bn–$20bn on capex annually across the group over the next five years.
MIAL's four-year bonds were placed at a yield of about 6.9%, sources close to the deal told IFR. Fitch has assigned an expected rating of BBB– to the bonds, having upgraded MIAL's existing notes by a notch on June 18 after India's airport regulator allowed the airport to charge higher fees for domestic and international flights from this financial year. Fitch expects MIAL's average leverage to improve to 3.7x over FY 2025–FY 2029, against its previous May 2024 forecast of 4.8x.
"For MIAL the pricing is attractive. US insurance companies are looking to buy shorter-tenor bonds as the current levels over US Treasuries are attractive," said a source aware of the plan. The spread was equivalent to 300bp over US Treasuries on the day the deal was announced.
The funds will be used primarily to refinance debt. In May 2022, MIAL privately placed US$750m of 7.25-year notes with Apollo-managed credit funds. The July 2029 notes had a 6.6% annual coupon, payable semi-annually, with a 50bp step-up from the fourth year onwards.
Besides repaying the existing MIAL bonds, the funds will be used to enhance "MIAL’s financial flexibility to support operations, modernisation and sustainability initiatives", Apollo said in a release.
The structure also allows for up to US$250m in additional funding to accelerate capital expenditure and capacity expansion.
Following Apollo's initial investment to provide operational flexibility to deleverage, the second bespoke financing is "now delivering an investment-grade rated solution," said Jamshid Ehsani, a partner at Apollo.
Adani said the transaction demonstrated its continued access to diversified global capital markets and its ability to attract high-quality investors. That is despite the indictment of senior executives in the US in relation to an alleged scheme to pay bribes to Indian officials for power supply contracts. The group has denied the allegations.
"We believe contagion risk from any adverse developments at Adani Group, of which MIAL is a part, is limited by the Indian government's 26% shareholding in MIAL through Airport Authority of India, together with AAI's three nominee directors and three independent directors out of a total of nine," wrote Fitch, noting that the bonds also have a robust cashflow waterfall mechanism and covenants that restrict cash being upstreamed to shareholders.
News of the indictment caused Adani Green Energy to pull a US$600m public bond offering on November 21, but the group has been able to find funding through placements to global asset managers as well as in the onshore bond market.
In April, BlackRock invested about US$250m in a US$750m privately placed bond issue by Adani's Dubai based subsidiary, Renew Exim, at about 400bp over SOFR with a tenor of three to five years, sources said. The investment is understood to have been seen as an attractive opportunity for BlackRock's clients in India's infrastructure sector.
Adani Group has been considering a return to the US dollar market via a private placement of Reg D bonds, a format that does not require the securities to be registered with the US Securities and Exchange Commission, since last year.
In the rupee market, Lakadia Banaskantha Transco, a power transmission special purpose vehicle of Adani Energy Solutions, has lined up a Rs5.79bn (US$67m) two-part long-tenor bond offering for July 1, according to market sources.
The offering comprises a Rs4.79bn March 31 2043 tranche at 7.7% and a Rs1bn September 30 2044 piece at 7.84%. The interest will be payable quarterly. HDFC Bank and Trust Investment Advisors are the arrangers.
Lakadia Banaskantha Transco is a transmission system project between Lakadia and Banaskantha in the western state of Gujarat with an operational track record of more than two years. It carries power from Gujarat's renewable energy zones to a pooling station.
The funds will be used to refinance at lower cost an offshore loan due in October, Icra said in a note on June 17.
Separately, Adani Ports & Special Economic Zone is mulling the sale of Rs30bn of 10-year onshore bonds in the next few weeks, according to sources close to the plan. The funds will be used to buy back US$1bn of US dollar bonds in the next 18 months.
This comes after APSEZ successfully raised Rs50bn from 15-year bonds placed with Life Insurance Corporation of India at 7.75% on May 30.