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The corporate guarantees given by Adani Ports to loans worth $807 million provided to Abbot’s lenders on behalf of the group promoters is worrying analysts.
While the Abbot project and the debt worth $2 billion is now taken over by the promoters from the listed entity, the corporate guarantees are still being provided by Adani Ports. This, analysts say, is an overhang on the company.
Adani Ports, through its subsidiary, Mundra Port Pty Ltd (MPPL), had acquired 50 million tonne per annum Abbot Point Terminal in Australia in June 2011 completely debt funded through bridge financing.
While arranging for funds, Adani Ports & SEZ had provided two unconditional corporate guarantees aggregating $807 million to the lenders in respect of Abbot's acquisition debt.
While Abbot Point has been sold to the promoters, which resulted in APSEZ's consolidated debt reducing from Rs 17,600 crore as on March 2012 to Rs 11,600 crore as on March 2013, corporate guarantees provided by APSEZ are still outstanding, say analysts.
“This has been a key concern for the stock considering the asset is highly leveraged and is presently loss-making. However, management has indicated that the outstanding guarantees shall definitely be vacated by March 2014,” says a Credit Suisse analyst in a report dated January 6. An email sent to Adani on January 7 did not elicit any response.
Elaborating, Credit Suisse said on March 30 last year, APSEZ has entered into two share purchase agreements with a promoter group entity to sell APSEZ's entire stake in Abbot Point for a total cash consideration of $212 million. The transaction was subject to the satisfaction of certain conditions precedent, including an approval from one of the lenders. While the transaction was expected to be concluded during first quarter of FY14, management presently expects the transaction to be concluded by March 2014.
Besides, of the total consideration, APSEZ is yet to receive $63 million from the promoters.
Australia is one of the group’s top investment destination, with the group chairman Gautam Adani announcing that the group will invest close to $8 billion in the project. The ambitious project includes setting up a railway line, a port project and coal mining. The Australian government cleared the project last month.
But back home, Adani Ports is in caught in a legal tangle, with the Gujarat High Court ordering closure of 12 units in Mundra SEZ for violations of environmental regulations.
