Adani to prepay Rs 4,100 crore loan as banks balk to refinance

By P R Sanjai, Suvashree Ghosh, Saikat Das, Steven Arons and Baiju Kalesh

The Adani Group plans to prepay a Rs 4,100 crore ($500 million) bridge loan due next month after some banks balked at refinancing the debt following a short seller report that sent the group’s assets tumbling.

Barclays Plc, Standard Chartered Plc, and Deutsche Bank AG are among the banks that lent Adani $4.5 billion to finance the purchase of Holcim Ltd cement assets last year. A portion of that loan is due March 9.

The lenders were in talks to refinance the loan up to a week before the critical report from Hindenburg Research was published, according to people familiar with the matter. Those negotiations stalled after the report alleging fraud led to a massive selloff, chilling the banks’ willingness to refinance, the people said, asking not to be identified discussing a private matter.

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The development is the first concrete sign that global banks are becoming more wary of financing Adani’s empire and coincides with comments from France’s TotalEnergies SE that a multi-billion dollar plan to produce green hydrogen with the Indian tycoon has been put on hold, pending audits of his conglomerate. MSCI Inc said on Wednesday it will review the eligibility of some Adani securities in its widely followed benchmark indexes, while major asset managers in Japan are stepping up disclosure over funds with exposure to Adani, signs of skittishness among international investors that could dampen a nascent rally in Adani shares.

An Adani spokesperson said the conglomerate had been in talks with the banks to refinance part of the loan but the group plans to prepay it. The spokesperson said discussions with the banks have not stalled.

Representatives for Barclays and Deutsche Bank declined to comment. A representative for Standard Chartered wasn’t immediately available.

This marks the second time in a week that the group has taken steps to prepay debt as it fights to regain investor confidence and stem the stock rout. Billionaire Gautam Adani and his family have prepaid $1.11 billion worth of borrowings backed by shares, the group said Monday.

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While it’s positive that the group is able to pay down such obligations, it also underscores that the spike in yields on Adani debt after the Hindenburg report would make refinancing those securities prohibitively expensive, among other challenges. The repayments also raise questions on how much more of the companies’ cash pile could be used to pay down its debt without refinancing.

International Scrutiny

Global banks are ramping up their scrutiny of the group following the Hindenburg report. Citigroup Inc’s wealth arm has stopped accepting Adani securities as collateral for margin loans, following a similar move by Credit Suisse Group AG.

The corporate empire of Adani, once the world’s second-richest person, has been thrown into a tailspin after the Hindenburg report on alleged malpractices. Ten Adani group companies including Adani Total Gas Ltd., Adani Enterprises Ltd, and Adani Transmission Ltd. at one point erased more than $100 billion from their combined market value in the selloff.

Hindenburg alleged that a web of Adani-family-controlled offshore shell entities in tax havens was used to facilitate corruption, money laundering, and taxpayer theft. The conglomerate has called the report “bogus,” and threatened legal action. Adani gave a video speech last week stating that the group’s balance sheet is healthy.

Adani Group’s shares have rallied this week after the debt payment and as traders covered short positions. Seven of the group’s 10 stocks were up in Wednesday’s session, with flagship Adani Enterprises rallying 20 per cent after surging the most since 2020 the previous day. The stock has more than doubled from the low it hit during the recent selloff.

(USD 1 = INR 82.62)