Special situation funds lap up Adani bonds
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Mumbai: A number of global special situation funds – high-yield and distressed-debt specialists – bought large amounts of foreign currency bonds of Adani Group firms in the days following the January 24 Hindenburg report, three people directly aware of the matter said.

These funds now collectively own Adani bonds worth close to $1 billion, they said. These are of varying tenors, with most of the buying having taken place in

and Special Economic Zone Ltd, and . “Funds which have invested include US hedge funds Baupost Group, Silver Point Capital,” said one of those cited above, who is a senior executive with a large structured credit fund that invests in high-yield debt.

‘Pre-negotiated Transactions’
“They also include special situation funds of Oaktree Capital, SSG Capital, Broad Peak Capital and Varde Partners,” said the person.

Spokespersons of Oaktree Capital and Silver Point Capital declined to comment. Emails sent to others remained unanswered till press time on Monday.

“The bulk of the transactions have already happened in my opinion and the supply has reduced considerably,” said another person cited above. “The sellers have largely been (big) bond houses, which exited when the yield spiked… These are largely pre-negotiated transactions, since liquidity in the normal course is often poor for such bonds but investors with higher risk appetite are clearly sensing a trade here.”

Adani Group bonds rallied on Monday, continuing Friday’s momentum after the group’s promoters said they will be repaying loans worth $1.11 billion early to release pledges on shares, ahead of their maturity in September 2024.

“Bonds of Adani Ports, and Adani Green, which are maturing in 2024, have also seen a 5-10% jump in prices on Monday after the company announced releasing of pledged shares,” said a trader who tracks the debt. “These were the securities which were hit the hardest and are now recovering.”

Rating companies Fitch and Moody’s have expressed confidence that the group will be able to meet its payment obligations, helping the bonds recover from their worst levels on Friday.

“Our immediate focus is primarily on assessing the rated entities’ overall financial flexibility, including their liquidity position and access to funding to support refinancing and ongoing growth initiatives,” rating company Moody’s had said in a release on Friday. “These adverse developments are likely to reduce the group’s ability to raise capital to fund committed capex or refinance maturing debt over the next one-two years. We recognise that a portion of the capex is deferrable, and the rated entities do not have significant maturing debt until FY25.”

Buy Call by I-Banks
Buy calls by US investment banks Goldman Sachs and JPMorgan had also helped to create demand for these bonds. Traders said that the steep fall in the price of these bonds had made them an attractive proposition for investment.

Some of the group bonds, including those of Adani Green, which had fallen to distressed levels on Thursday after holding company

withdrew its Rs 20,000 crore share sale, recovered further on Monday with yields falling to 27% from 36% on Friday. Dealers said shallowness in the overseas bond market and evolving news flow are likely to keep these bonds volatile.

The Hindenburg Research report had sent Adani Group securities tumbling. The group has rejected the report and denied any wrongdoing.

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