Adani Green Energy Ltd. has faced significant setbacks with the cancellation of its bond offerings. This decision comes in the wake of legal actions against senior Adani Group executives and increasing regulatory scrutiny. The company's attempts to align liabilities with power purchase agreements and access capital have been thwarted.
Unraveling the Adani Green Bond Saga and Its Consequences
First Cancellation: A Month Before US Election
In the previous month, Adani Green Energy abandoned a similar bond offering due to unfavorable rates. This move highlighted the challenges the company faced in the market even before the recent legal developments. It showed how external factors such as the US election could influence their fundraising plans. Investors were seeking higher yields than what the company was willing to offer, indicating a shift in market sentiment.The company had initially secured a substantial order book from investors across different regions, but the changing market conditions led to this withdrawal. It demonstrated the volatility and unpredictability of the bond market and its impact on Adani Green's financial strategies.Second Cancellation: Impact of Legal Actions
The most recent cancellation, of a $600 million bond offering priced at approximately 7.45 - 7.5%, was a direct result of the U.S. Department of Justice and SEC's announcement related to a court order. Senior Adani Group executives, including Gautam Adani and Sagar Adani, were indicted for allegedly offering $250 million in bribes for contract procurement.This legal action has had a profound impact on the company's ability to access international capital markets. The subsidiaries have decided not to proceed with the proposed USD denominated bond offerings, fearing the potential consequences of being associated with such legal issues.The bond initiative was aimed at releasing capital from an existing $3.4 billion revolving credit facility to fund new projects. However, the legal uncertainties have put these plans on hold, potentially affecting the company's growth and expansion plans.Previous Month's Bonds and Market Volatility
In February 2023, Adani Enterprises withdrew a follow-on public offering following a Hindenburg Research report. This led to a significant reduction in the group's market capitalization of Rs 9 lakh crore. While share prices have since recovered, the bond market uncertainties continue to persist, further complicated by geopolitical tensions.The previous month's bonds, initially offered with a fixed coupon rate of 7% over 20 years, also faced challenges. Investors' demands for higher yields and the overall market volatility made it difficult for the company to successfully issue the bonds.These cancellations and market fluctuations highlight the complex and challenging environment that Adani Green is operating in. The company must navigate through legal issues, market uncertainties, and geopolitical tensions to ensure its financial stability and future growth.