Adani Mumbai Electricity Ltd (AEML), a unit of Adani Transmission that supplies power to Mumbai suburbs, has raised $1 billion through a dollar bond sale to investors abroad. The money raised will be used to refinance the company’s debt in India at a cheaper rate, people familiar with the issue said.The company raised the funds at 230 basis points above the 10-year US treasury, which was trading around 1.63 per cent on Wednesday, resulting in a coupon rate of 3.93 per cent. One basis point is 0.01 percentage point.
“We got commitments of up to $6 billion, most of it from Asia, which helped us squeeze the pricing from the initial guidance of 270 basis points above the 10-year US treasury. The demand was strong despite the uncertainties in Asia due to the spread of the coronavirus and also the volatilities linked to the budget in India,” said a person closely involved with the issue.
Deutsche Bank, BofA Securities, DBS Bank, Standard Chartered and Barclays were among the banks involved in the issue.
This is the second fundraising for the $13-billion agriculture-to-energy conglomerate this week after Adani Transmission raised $310 million through a private placement of debt in the US two days ago. AEML did not respond to ET’s mailed queries seeking comment.
“After paying for swapping to the rupee, the company can expect to save at least 50 to 75 basis points in its interest cost. Savings will also come from releasing immediate cash flows as unlike Indian bank-loans, these bonds do not have to be paid until maturity, which is only after 10 years,” said another person involved in the deal. The issue is rated BBB- by Fitch citing a stable regulatory framework, revenue visibility, low counterparty risk and stable financials.
“AEML plans to use the proceeds to refinance the majority of its debt. The balance debt will be replaced by a subordinated loan, which will improve its financial profile. AEML has low counterparty risk, with direct exposure to retail customers in India’s commercial hub, Mumbai. Construction risk is also low as planned investments are largely directed toward granular capital expenditure approved by the regulator,” Fitch said.
Fitch forecasts the company’s net debt at Rs 7,349 crore at the end of March, with operating EBITDA at Rs 1,389 crore.
Source: Economic Times