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  1. Adani Australia port must refinance soon or face rating cut, says S&P Global Ratings

Adani Australia port must refinance soon or face rating cut, says S&P Global Ratings

An Australian deep water port linked to one of the world’s biggest planned coal mines should lock in refinancing within six months of a loan maturing in November to safeguard credit ratings on its debt, according to S&P Global Ratings.

By: | Published: January 9, 2018 11:17 AM
The loan is coming due at a sensitive moment for Adani Enterprises Ltd.’s Australian operations. (Image: Reuters)

An Australian deep water port linked to one of the world’s biggest planned coal mines should lock in refinancing within six months of a loan maturing in November to safeguard credit ratings on its debt, according to S&P Global Ratings. Adani Abbot Point Terminal Pty in Australia’s Queensland state, controlled by Indian billionaire Gautam Adani, has to refinance about A$326 million ($256 million) of the loan due in November, S&P said. The credit assessor currently has a BBB- credit score and stable outlook on the port’s rated debt securities. “We expect the refinance to be completed on time,” Meet Vora, an analyst at S&P, said in a telephone interview. “If it’s within the six months of the maturity and nothing’s happening we start getting a bit concerned, which is where we need to start taking some actions.”

The loan is coming due at a sensitive moment for Adani Enterprises Ltd.’s Australian operations. The company intends to use the port to ship coal from its planned Carmichael mine in Queensland. The project has drawn ire from environmentalists, who say it will endanger the health of the nation’s Great Barrier Reef. Adani Enterprises is separately seeking as much as A$3 billion in debt funding to help start producing at the mine, but lenders from Goldman Sachs Group Inc. to three of China’s largest banks have ruled out providing loans for the project.

Adani began courting lenders for a new five-year, A$250 million loan for the port last September — the proceeds of which may be used to refinance part of the loan that’s maturing later this year, according to a person familiar with the matter. Adani is still searching for lenders willing to finance its new loan, according to the person who asked not to be identified because the matter is private.

Moody’s Investors Service expects Adani to be able to refinance the loan but says that failure to do so would be a near-term risk for the terminal. Adani’s management could also choose to deploy cash the port holds to slash its debt, analyst Arnon Musiker said. Improving demand for thermal coal will further support the Abbot Point’s business and finances, according to Musiker.

Adani’s Australia Chief Executive Officer Jeyakumar Janakaraj declined to answer questions when contacted by telephone. An Adani spokeswoman said that, as reported in the Courier-Mail newspaper in December, the debt had already been refinanced. She didn’t reply to follow-up questions asking if that debt referred to bonds or loans when contacted by email.

Port Expansion

While Adani’s port business is financed separately from its mining division, the company intends to transport coal sourced from its planned Carmichael mine by rail to the export terminal, which it acquired for A$1.8 billion in 2011. Abbot Point has one terminal and is being expanded to 60 million tons from its current 50 million ton capacity, according to its website. The terminal has exported coal since it was commissioned in 1984. Major producers in Queensland’s Bowen Basin coal province including Glencore Plc export supplies from Abbot Point.

The loan refinancing efforts come after Adani Abbot Point Terminal sold $500 million of bonds in December. The sale was part of an effort to refinance about A$976 million of combined Australian dollar bonds and loan debt due in November this year, according to S&P. The company called its Australian currency notes — which would have matured in November — on Dec. 12 following the sale of its dollar debt, Bloomberg-compiled data show. The U.S. dollar bond sale highlighted continued debt investor interest in the port, Musiker said. “There’s still appetite for some paper — it would just depend on spread,” he said.

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