Adani in crisis as bonds hit distressed levels

Gautam Adani’s beleaguered empire is spiralling into crisis, as the fallout from a short-seller’s research report leads to ever more intense pressure on the indebted conglomerate’s securities.

Bonds of the Indian billionaire’s flagship firm plunged to distressed levels in US trading, and the company abruptly pulled a record domestic stock offering after shares in the Adani group suffered a Us$92bil (Rm389bil) crash.

The turmoil is worsening day by day since short seller Hindenburg Research accused the Adani group of “brazen” market manipulation and accounting fraud last week.

As the sell-off picked up pace, Credit Suisse Group AG stopped accepting the firms’ bonds as collateral for margin loans to its private banking clients and banks, including Barclays Plc, have asked for more shares as collateral against loans.

Adani has repeatedly denied Hindenburg’s allegations, called the report “bogus,” and threatened legal action. Hindenburg’s report has also raised questions over India’s corporate governance, while Adani himself has called the report an attack on the country itself.

Matters escalated Wednesday with a record 28% plunge in Adani Enterprises Ltd. It subsequently abandoned a Us$2.4bil (Rm10.2bil)

“Given these extraordinary circumstances, the company’s board felt that going ahead with the issue will not be morally correct.” adani Group

follow-on share sale, even though it was fully subscribed with backing from prominent Indian and Gulf investors.

“Given these extraordinary circumstances, the company’s board felt that going ahead with the issue will not be morally correct,” it said in a statement. The company said it was working with book-running lead managers to refund the proceeds received in escrow and to also release the amounts blocked in bank accounts for subscription to this issue.

“It’s unusual for a secondary offering like this to be cancelled,” said Ben Silverman, director of research at Veritydata. “Pulling an offering at the last minute doesn’t inspire a lot of confidence right now.”

Bonds issued by Adani Ports & Special Economic Zone Ltd and Adani Green Energy Ltd dropped the most in global secondary trading on Wednesday. Some notes of the two companies yield more than 30%, way over the average investment grade yield of 4.96% and junk bond yield of 8.14%.

Adani Ports’ 3.375% bond due July 2024 tumbled more than 20 US cents (RM0.85) on the dollar to 69.75 US cents (RM2.96) in investment-grade secondary trading, according to Trace data. At least four other Adani Ports bonds hit distressed levels, falling to 69 US cents (RM2.92) or lower.

Adani Green Energy’s 4.375% bond due September 2024 declined more than 12 US cents (51 sen) on the dollar to 66.75 US cents (RM2.84) in high-yield secondary trading, according to Trace data. Adani has now lost the title as Asia’s richest person to rival billionaire Mukesh Ambani, according to the Bloomberg Billionaires Index.