When executives from Adani Ports & Special Economic Zone hit the road to pitch a bond in November, markets were in a tail-spin. Donald Trump had been elected less than a week before, and currency, rate and stock markets were all experiencing bouts of volatility.
That did not rule out a deal. A Chinese local government financing vehicle tapped the bond market just a day after the US election. But after sounding out investors on pricing, executives at Adani Ports were told they would need to pay a new issue premium of at least 10bp, a syndicate banker said.
“Adani didn’t want to pay the price,” the banker said.
Instead, the issuer put the deal on hold, only returning to the market this week amid an encouraging glut of liquidity in Asia’s bond market.
That proved a wise choice. Adani Ports raised $500 million from a five-year bond on Wednesday and, according to estimates from bankers and analysts, it got away without paying any new issue premium.
Coming to America
The bookrunners initially approached investors with price guidance of 235bp over Treasuries for the five-year bond. But after generating strong demand from investors, they cut that to between 215bp and 225bp over Treasuries. In the end, Adani Ports got away with a spread of 215bp.
The company made its debut in the middle in the middle of 2015, selling a $650 million bond. The inclusion of 144a registration in that deal, which allowed US investors to participate, proved a smart move for the company. It ended up allocating more than a third of the bond to US investors.
When it came back to the market this week, it stuck with the same formula — and got similar results.
US investors were allocated around 38% of the deal, with the same amount going to Asia and 24% going to accounts in Europe, the Middle East and Africa. Some 129 investors participated in the deal, placing around $1 billion of orders between them.
In terms of investor types, fund managers and asset managers bought 79% of the bond; insurance companies, pension funds and sovereign wealth funds were allocated 10%; banks and private banks took another 10%; and corporations and other investors got the remaining 1%.
Adani Ports came to the bond market a day after India’s state-owned Bharat Petroleum raised $600 million from a 10-year bond. The success of that deal no doubt helped. The bond tightened in secondary market trading on Wednesday, helping boost sentiment just as Adani Ports was building the book.
But Adani Ports was not relying on the state-owned issuer to open the market, another syndicate banker said.
“It’s a different tenor, a different sector, a different ownership structure,” she said. “They were not waiting.”
Adani Ports manages and develops ports, as well as providing logistics services to other port and shipping companies. But it is also developing a special economic zone around its flagship Mundra port, the largest port in India.
The company told investors in October that its second quarter consolidated operating income had grown 21% year-on-year to Rs40.1 billion ($587.4 million). But its stock had fallen significantly during that period, meaning earnings-per-share growth was even more impressive — a whopping 61%.
Adani Ports met investors in Asia, Europe, the Middle East and the United States during its November roadshow.
Bank of America Merrill Lynch, Barclays, Citi and Standard Chartered were the global coordinators of Adani Ports’ bond. Credit Suisse, Emirates NBD Capital and SBI Capital were the bookrunners alongside them.