US-based GIP in talks with Apollo Global to buy Adani bonds

US-based Global Infrastructure Partners (GIP) is in talks with Apollo Global to buy up to $175 million worth of offshore bonds in Adani Airports as the recent sell-off in the secondary market has made the debt instruments attractive, people familiar with the matter told ET.

To be sure, this is a secondary market transaction where there won't be any fund flow into the company but will support secondary market prices. It is looking to buy bonds sold by Mumbai International Airport (MIAL).

GIP manages about $84 billion in assets on behalf of its global investor base.

Adani group, Apollo and GIP did not comment on the matter.

“At least three global institutional investors with dedicated focus on infrastructure have shown interest in owning Adani group bonds, where proceeds are used related to the airport business,” said one of the persons cited above.
Earlier this year, Mumbai International Airport (MIAL), run by Adani Airport Holdings (AAHL), raised about $750 million in debt from US-based Apollo Global Management. The money was raised via bonds privately placed in the US, known as USPP Debt. The debt papers, of seven-plus-year maturities, carry a coupon of about 6.5%, said a market source.

"Apollo's credit business was able to provide a scaled, long-term capital solution for MIAL, with the majority of proceeds from the 7.25-years, $750 million notes," MIAL had said in a statement on May 4.

MIAL, which runs the busy terminals at Mumbai airport, is a premium asset within Adani's expanding airport infrastructure portfolio.

Privately placed bonds in the US are not as liquid as publicly listed papers there. Overall, Adani group bonds sold overseas were yielding higher pulling prices down amid concerns of ‘overleveraging’. When yields rise, prices fall.

About two weeks ago, Adani Ports’ dollar bonds dropped more than Indian peers on concern about the group’s debt, and its notes due in August 2027 fell to an all-time low this week, Bloomberg compiled prices showed. Bonds of group companies including Adani Green Energy and Adani Transmission also mostly underperformed the broader Indian market.

However, those are off their peak after CreditSights acknowledged an error in their research report on the group’s debt profile.

Nonetheless, spiking US Treasury yields weighed on all Indian high-yield issuers.

“If the deal happens, it will add to overseas investor confidence pulling down yields in the international market further,” said one of the persons cited above.

Adani Airport, a subsidiary of Adani Enterprises, currently manages seven airports across the country and is on an expansion spree as it bids to run more airports

In May, global rating company Fitch assigned MIAL a 'BB+ rating, a notch lower than the country’s sovereign grade. The rating pertained to MIAL’s $750-million senior secured notes due 2029. The outlook is 'Stable'. The rating company is optimistic about India's aviation sector growth.

The US Private Placement (“USPP”) market is a US private bond market that is available to both US and non-US companies, according to Tim Hayter, Group Treasurer, Bunzl pl, a multinational business solutions provider.