Adani Cement Industries Ltd has pre-paid $200 million in the past week to reduce a mezzanine loan of $1 billion taken from global banks to fund the purchase of the Indian units of Holcim Ltd, reported Bloomberg. In May last year, Adani Group announced the deal to acquire Switzerland-based Holcim’s India businesses for $10.5 billion.
The report citing people familiar with the matter also said that the pre-payment will help billionaire Gautam Adani-led firm seek an extension of the debt taken to fund the acquisition by three years.
To finance the acquisition of Holcim Ltd’s cement assets, global banks provided Adani Group with $4.5 billion. The mezzanine loan was due for maturity in September 2024. A mezzanine loan is a hybrid of debt and equity, where lenders provide capital to a company in exchange for the right to convert that debt into equity ownership in the future. Mezzanine loans are considered riskier than traditional bank loans and often come with higher interest rates to compensate for the additional risk.
At the time of the deal, Gautam Adani hailed the purchase of Holcim’s cement assets, Ambuja Cements and ACC. After the acquisition was completed in September last year, Adani held a 63.15 per cent stake in Ambuja Cements and 56.69 per cent in ACC (of which 50.05 per cent is held through Ambuja Cements).
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Adani Group noted four reasons why the acquisition was historic, including the fact that it made them the second-largest cement manufacturer in India and gave them two of the country’s most recognizable brands. Additionally, it represented the largest inbound M&A transaction ever in India’s infrastructure and materials sector and was completed in just four months. Furthermore, Adani emphasized that this acquisition was made at a time when India is poised for a tremendous economic boom.
In late January, Adani Group faced setbacks when the US-based short seller group Hindenburg Research released a report alleging wrongdoing, causing Adani’s stocks and bonds to plummet. However, Adani Group refuted these allegations and managed to regain some of their losses. In the meantime, the group has proactively paid off approximately $2 billion in share-backed loans, fulfilled their bond repayments on schedule, and secured a $1.9 billion investment from renowned investor Rajiv Jain of GQG Partners.