Goldman, Cerberus Buy Rare Indian Junk Bond Offering 21%
Indian two thousand and five hundered rupee notes arranged for photogaph. (Photographer: Dhiraj Singh/Bloomberg)

Goldman, Cerberus Buy Rare Indian Junk Bond Offering 21%

Goldman Sachs Group Inc., Cerberus Capital Management and Edelweiss Financial Services Ltd. bought into a junk-rated rupee bond sale, a rare issue yielding as much as 21%.

The firms invested in the 16 billion rupee ($221 million) issuance from Kesoram Industries Ltd. through various vehicles, according to an exchange filing Tuesday. The Indian cement manufacturer defaulted on its debt last year and is working to restructure repayments.

The investments reflect growing interest in Indian distressed assets. Global heavyweights such as Apollo Global Management Inc. and Oaktree Capital Group have either struck deals or scaled up their local teams in recent years to bet on businesses struggling to stay afloat in the nation, which has a worsening pile of bad loans.

Key Details:
  • The non-convertible bonds offer an 20.75% extended internal return rate, according to an exchange filing.
  • Cerberus invested via its vehicle Promontoria Holding 206 B.V.; Goldman through Mercer Investments (Singapore) Pte.; Edelweiss through its special situation funds
  • The three firms invested equally in the offering, according to people with knowledge of the matter, asking not to be identified as the details are private
  • Read more: Distressed Indian Company to Sell Junk Bonds Yielding 21%

Kolkata-based Kesoram, whose history dates back over 100 years, this month allotted equity shares and preference securities to 10 creditors as part of its plan to restructure debt. Funds from the bond sale will be used in part to repay existing loans and overdue liabilities.

The securities are rated D by Crisil and carry a coupon that increases in stages the longer they are outstanding. The low-rated debt sale is an oddity in the local bond market, where state-owned issuers or companies with high ratings dominate bond offerings.

Kesoram hadn’t complied with certain financial covenants and defaulted on 4.6 billion rupees of debt as of Dec. 31, the company said in a statement last month.

As security, the company’s founder unit Manav Investment and Trading Co. also pledged 3.175 million shares or 1.93% of the total share capital for the bond investors.

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