The Adani Group, which recently acquired Holcim’s local businesses in India’s biggest cement takeover, is in talks with more than a dozen foreign banks to raise up to $4.5 billion through a mix of overseas loan instruments, multiple bankers aware of the negotiations.
This will be one of the biggest loan-based fundraisings in foreign currency by an Indian corporate entity. Tenured instruments, such as bonds offering pre-specified coupons, are usually sold overseas for raising large quantities of cash.
The proposed loan structures include mezzanine financing, stock-backed bridge loans to be repaid in cash, and a senior debt facility for 18 months. The last of these structured instruments could be refinanced later with either a long-term bond or loan.
Proceeds from the latest round of fundraising will be used to part-finance the acquisition of Holcim’s stakes in the two Mumbai-listed cement companies – Ambuja Cements and ACC. Barclays, Deutsche Bank and Standard Chartered Bank earlier underwrote the whole funding lines.
Those credit lines are now being split, with several other overseas banks participating in the transactions.
The senior debt facility will likely raise up to $3 billion, while the mezzanine line may raise $1 billion. The bridge loan with one-to-three years maturities, is pegged at $500 million and would be repaid in cash.
Bridge loans would be backed by shares of the two acquired cement companies.
The mezzanine loan is proposed to be priced in the range of 7-8%. The loans are expected to be priced after adding 450 basis points to the Secured Overnight Financing Rate (SOFR), a global rate gauge that replaced the London Interbank Offer Rate (LIBOR).
One basis point is 0.01%.
Top Global Banks
Some of the banks involved in the discussions include BNP Paribas, Citi, JP Morgan, MUFG, Mizuho Bank, SMBC and a few Middle East-based lenders.
Mezzanine financing is a hybrid of debt and equity financing that gives the lender the right to convert the debt to equity in case of default.
The group is currently exploring the capacity of each bank to lend. Each bank may lend in the range of $200-500 million.
“The Adani Group is looking to spread the syndication initially limited to only three banks,” said an executive involved in the process.
Earlier, three banks underwrote the whole sum offering about $1.8 billion each.
“The borrower is now checking with each bank offering multiple options to raise dollar funds,” said another executive.
The Adani Group is acquiring the two companies for $10.5 billion. The Adani Group is reportedly planning to bring in $3 billion as promoter equity.
Swiss-based Holcim signed a binding agreement with the Adani Group for the takeover.
Holcim, through its subsidiaries, holds 63.19% in Ambuja Cements and 54.33% in ACC.
The open offers for the shareholders of Ambuja Cements and ACC will begin from July 6 and close on July 19, according to a tentative schedule by the Adani family.
An open offer is triggered if an acquirer holds 25% stake or more of a target company.
