SP Group raises $ 3.3 billion through bond issue

Mumbai: The Shapoorji Pallonji Group has closed a $3.34-billion (₹28,500 crore), high-yielding debt issue in one of India's biggest private credit fundraises this year, sources told ET. A part of the group's Tata Sons stake would also be used to provide comfort to investors in the high-risk bonds.

The three-year non-convertible bonds offered 19.75% annual yield paid at maturity. Deutsche Bank was the banker of the deal.

"The term sheet was signed on May 15, with settlement expected around May 21," said one of the sources aware of the fundraise.

The borrowing is against the group's 9.2% stake in Tata Sons held via Sterling Investment, all shares in its real estate company, Shapoorji Pallonji Real Estate, and its oil and gas business, SP Energy.

Agencies

Purpose of Issuance

"The borrowing cost is high because this is a structured and risky credit, with limited clarity on the enforceability of the underlying collateral and no cash flows backing it," a debt market investor said.

At the time of redemption, this debt will balloon to Rs 51,000 crore - at the current rate of exchange - given the interest getting accrued at 19.75% for three years.

The structure includes key creditor protections such as a most-favoured-nation (MFN) clause and a step-up provision. Under the MFN clause, any future borrowings at a higher coupon would require the existing facility to match the higher rate. The step-up provision means any covenant breach would trigger an increase in coupon payments.

The term sheet mandates monetisation of the group's real estate unit within 24 months, targeting around ₹13,000 crore. Similarly, SP Energy, the sources said, could be worth about $800 million, or ₹6,800 crore.

An SP Group spokesperson did not respond to requests for comment.

Proceeds from the issuance will be used primarily to redeem NCDs issued by SP Group's Sterling Investment Corp. Ltd. to Ares and Farallon, which is around $2.4 billion. The remainder will go toward redeeming a part of Goswami Infratech's NCDs.

Goswami Infratech had, in 2023, raised Rs 14,300 crore through an NCD placement, of which it had repaid ₹7,500 crore through funds raised from Afcons listing and monetisation of port assets like Gopalpur Port and Dharamtar Ports. Around ₹8,800 crore is outstanding.

Ares, Farallon, Cerberus Capital Management, and Davidson Kempner each are likely to subscribe to roughly $400 million, while Deutsche Bank, also the sole arranger for the transaction, could subscribe to about $300 million along with other investors.

Other participating investors include Pimco, Sona Asset Management, BlackRock, King Street Capital, Edelweiss Alternatives, RV Capital and DSP Finance. Edelweiss, BlackRock and PIMCO could take around $50 million to $100 million.

In total, the SP Group owns 18.28% of Tata Sons, but this entire stake, which is split between two holding companies, Sterling, and Cyrus, has already been pledged as collateral for two high-interest loans.