BlackRock, Neuberger bought Adani bonds post Hindenburg bombshell

By Harry Suhartono

Some of the world’s largest asset managers raised their holdings of Adani Group dollar bonds last year after the unprecedented rout sparked by Hindenburg Research.
 

BlackRock Inc. held $125 million of dollar bonds at par value, double its position from the end of 2022, while holdings by State Street Corp. surged more than 50 per cent during the period to $16 million, if calculated at par. Lombard Odier’s holding rose 20 per cent to nearly $140 million, while Neuberger Berman Group LLC’s  increased about 42 per cent to just over $40 million, according to data compiled by Bloomberg as of Jan. 23.

The purchases reflect the change in fortune for billionaire Gautam Adani’s empire as it paid down debt, refinanced loans and won $5 billion in equity investments to fend off the short seller’s allegations of fraud in its bombshell Jan. 24, 2023 report. Adani has repeatedly denied Hindenburg’s claims, and a large majority of the group’s 15 dollar bonds now trade above distressed levels.

“Neuberger Berman did increase holdings in the bonds,” in light of discussions with company management, the quality of its assets and their stable cashflow, strong counterparties such as government agencies and manageable leverage, Alexander Samuelson, head of media relations, said. 

“We see no negative connotations in the performance or disclosures of Adani operating assets in Hindenburg’s report. We believe the board has taken active steps to reduce debt and have confidence going forward,” he said. 

Although the figures don’t capture all bondholders, they provide a window into investor activity as the securities sold off and later recouped many of their losses. The names listed may include the holdings of index or passive funds, which have little choice in what they buy or sell, as well as the names of custodians or administers that don’t necessarily own the debt. In some cases investors moved money from the bond of one unit to that of another. 

Doubleline Capital LP and Jupiter Fund Management Plc also boosted exposure to Adani debt, as the depressed prices of the group’s dollar debt likely provided a buying opportunity.

The sprawling ports-to-power conglomerate has since repaid debt and cut founders’ share pledges to shore up confidence among investors and lenders after the group lost more than $150 billion in market value at one point and bond prices plunged.

A year later, a large majority of the Adani Group’s 15 dollar bonds trade above 80 cents on the dollar — a level generally considered as the cut-off for a bond being distressed. Several are quoting higher than their Jan. 24, 2023 levels, according to data compiled by Bloomberg. And the group’s net debt fell 3.5 per cent to $21.72 billion in the six months through September, according to an exchange filing. 

“They were able to access financing,” said Justin Ong, a Singapore-based credit analyst at Columbia Threadneedle. “The performance of Adani entities remains solid.”

On Monday, S&P Global Ratings raised its outlook on Adani Ports & Special Economic Zone Ltd. and Adani Electricity Mumbai to stable from negative, citing expectations of robust cash flow over the next 12 to 24 months.

Some investors also sold. UBS AG’s bond holdings dropped just over 20 per cent to some $44 million over the past year, while Singapore’s Temasek Holdings Pte. exited its position entirely last year, data compiled by Bloomberg show.

Representatives for Temasek, UBS, Jupiter, BlackRock and State Street declined to comment. Lombard Odier did not responded to an emailed question from Bloomberg News about the holdings. An Adani Group spokesperson did not comment when contacted by Bloomberg about the data. 

Meanwhile, the combined stock market value of 10 Adani companies has more than doubled to $176 billion from a record low of $82 billion in February 2023.

Hindenburg’s report “was quite equity focused,” said Sabrina Jacobs, London-based client portfolio manager for fixed income at Pictet Asset Management, who still likes Adani Ports for its assets and robust cashflow.