India’s Adani Group has been a regular visitor to the international bond markets, but Adani Green Energy’s US dollar issue in October marked a new stage of development for Indian issuers.
The US$362.5m amortising green bond had a door-to-door maturity of 20 years, and a weighted average life of 13.47 years. This was the first deal from India to use an amortising project finance-type structure, setting a template for infrastructure developers looking to lock in long-term funding and lower interest costs without the refinancing risk of a bullet maturity.
The structure also met growing global demand for duration and gave foreign investors the first chance to buy an investment-grade bond from India’s renewable energy sector.
Companies from the Adani group had issued high-yield bonds earlier in the year, but bookrunners structured this deal to achieve investment grade ratings of Baa3/BBB-/BBB-.
Three wholly owned solar power subsidiaries of Adani Green Energy – Adani Renewable Energy, Kodangal Solar Parks and Wardha Solar (Maharashtra) – issued the bonds. Between them they have total solar capacity of 570MW, and long-term power purchase agreements with a weighted average remaining term of about 24 years with entities such as state-backed Solar Energy Corp of India.
That allowed the issue to achieve a longer tenor than anyone had attempted in the Indian market since 2015, despite weak market conditions during bookbuilding.
India’s restrictions on offshore borrowings meant that Adani capped the issue size at US$362.5m and earmarked the proceeds for refinancing debt, among other uses.
In spite of choppy conditions, it attracted a huge book of over US$2.1bn from more than 150 accounts and priced at 4.625%, well inside initial guidance of 5% area and a big saving on its previous borrowing costs. That helped reprice the India-listed stock, driving a 70% rally over the six weeks from the end of September.
Adani opted for a 144A/Reg S format to reach a broad range of investors, and it paid off as US accounts took 24% of the bonds, alongside a 60% allocation to Asia and 16% to EMEA. The green status of the bonds also helped engagement with ESG funds, which previously had only been able to consider high-yield paper when they wanted to buy dollar bonds from India’s renewable sector.
This transaction closely matched the life of the power purchase agreements of the solar power assets and allowed Adani to diversify its investor base, freeing up bank lines onshore. Capacity in the Indian bank market has been hit by stricter capital requirements, lingering bad debts and RBI rules restricting banks from lending more than 25% of their capital to a single corporate group.
Barclays, Citigroup, Credit Suisse, Deutsche Bank, JP Morgan, MUFG and Standard Chartered were joint global coordinators and bookrunners.
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