UPDATE 1: Continuum Green Tests Investor Interest for New USD Public Bond to Refinance $400M Holdco Bond Due 2026, Aims to Lower Financing Cost

UPDATE 1: 4:30 a.m. ET 7/24/2023: Continuum Green Energy Ltd. has reached out to offshore fixed income investors to test water for a new USD denominated bond to refinance its outstanding $400 million 11% privately placed holdco bond due 2026 at a lower cost, two sources familiar with the development said. While the discussions are still at a very early stage, the Indian renewable power producer is contemplating a tenor of three years for the new holdco bond, the sources said.

The company held multiple meetings with investors last week in Singapore to provide a business update as well as gauge investor interest for a new bond issuance, the sources said, adding that if the investors warm up to the new bond, Continuum may consider launching it in a month.

Continuum can call its $400 million holdco bonds at par, according to the bond terms, due to a change in the withholding tax by the Government of India in its Finance Bill 2023. It had raised $400 million from investors including Ares SSG and Singapore’s sovereign wealth fund GIC by privately placing a 3.5-year bond in July 2022, the sources said. Although Continuum initially raised $350 million, another $50 million was raised through exercising of a greenshoe option by the company, the sources said.

While the maturity is two and a half years away, the company is keen on reducing its financing cost by issuing a new public bond which it expects to be around 300 basis points cheaper than the existing one helped by a drop in the hedging costs, the sources said.

The company also told investors that it does not plan to call its outstanding $521.7 million 4.5% bonds due 2027 despite a change in the withholding tax regime, the sources said.

A Continuum Energy spokesperson did not respond to an email request for a comment.

–Malvika Joshi

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Original Story 12:50 a.m. UTC on July 14, 2022

Deutsche Bank Lead Arranger for Continuum Green Energy $350M 11% 3.5Y Private Bonds Placed With SSG, GIC

Deutsche Bank is the lead arranger of the Indian renewable energy group Continuum Green Energy Ltd.’s $350 million privately placed 11% 3.5 year secured notes, according to two sources familiar.

Ares SSG and Singapore’s sovereign fund GIC are the investors in the issue, the sources said.

The notes are issued at the holdco level of Continuum Green Energy and the proceeds will be used to refinance existing debt, the sources said.

In April, Continuum Green Energy Ltd. was looking to raise up to $400 million 144A/ Regulation S senior secured notes, proposed to be issued through its wholly-owned subsidiary Continuum Energy Aura Pte. Ltd., as reported. Pricing whispers were in the 6.5% to 7.5% range for Indian renewable energy group bonds, as further reported.

S&P Global Ratings on June 29 lowered the long-term issuer credit rating on Continuum Green Energy Ltd. to 'B+' from 'BB-,' lowered the issue rating on the proposed senior secured notes of Continuum Energy Aura Pte. Ltd., to 'B+' from 'BB-' and withdrew all ratings at the issuers' request.

S&P said in the report that Continuum's interest-servicing ability is likely to weaken due to significantly higher funding costs relative to prior expectations. S&P’s base case assumes Continuum will raise up to $400 million in senior secured notes at funding costs of 12.5% (including hedging costs), higher than previous estimates.

S&P also estimated that the total debt requirement of the company at the end of fiscal year ending March 31, 2023 will be about $1.4 billion, assuming the projected capex of about $680 million in fiscal year ending March 31, 2023 is debt funded from the domestic market.

The company will require additional debt of $300 million to cover its capex plan if the company were to proceed with all the expenditures, the rating agency added.

Ares SSG and Deutsche Bank declined to comment. Continuum Green Energy, GIC did not respond to requests for comment.

Continuum Green Energy Ltd's capital structure is below:

– Dipika Lalwani, Poonam Bansal