Defying headwinds
In a brutal year for Asian high yield, Greenko Wind Projects (Mauritius) was able to break new ground with India’s first greenfield project bond.
High-yield deals were few and far between in 2022, and those that did make it to market after January faced rising rates and geopolitical headwinds. Successful trades required deft navigation of the market, something Greenko Wind exemplified.
Greenko Wind, a subsidiary of Greenko Energy Holdings, which provided a guarantee for the notes, announced its US$750m three-year non-call two green trade at the end of March. The deal was months in the making, as it was set to refinance a Rs22bn (US$265.6m) bridge loan, using the offshore proceeds to subscribe to onshore rupee-denominated securities.
While the Greenko name has become well known among investors, and the Indian renewable sector has remained popular, Greenko Wind’s trade threw in a new complication. The proceeds from the issuance were to be used to for a pumped hydro storage plant project in Andhra Pradesh that is not yet operational.
The borrower took two days to meet with investors globally, explaining the proposed trade, the project and its related technology, and feeling out the market dynamics just six weeks after Russia invaded Ukraine.
Fair value was tricky to find given how tumultuous the market was, as well as the dearth of high-yield issuance in Asia at the time. The last sizable Asian high-yield deal, a US$350m Studio City bond, had been priced about seven weeks prior.
Greenko Wind had to pay a higher yield than a bond backed by an operational project would have done, as well as an additional concession due to the unfavourable market conditions.
Part of the reason the issuer opted for a short tenor was to raise funds immediately but return to the market with a longer-dated deal once its project is complete and generating revenue. At that time, the borrower should be able to price more tightly.
The investor work paid off as the order book reached more than US$2bn during the bookbuild, allowing the issuer to upsize its deal. It was the last Indian issuer to manage to access the offshore market in 2022, showing the wisdom of the deal’s timing.
The Ba1/BB (Moody’s/Fitch) bonds were priced at par to yield 5.5%, inside the initial price guidance of 5.8% area. Asian investors took 46% of the 144A/Reg S bonds, the US 32%, and EMEA 22%. Asset and fund managers took 90%, banks and private banks 5%, insurers and pension funds 4%, and others 1%.
Barclays, Deutsche Bank, DBS and JP Morgan were the lead managers and bookrunners. JP Morgan was also the green structuring agent.
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