💼 Brief Take: Hella Infra’s Bond Loophole
The Indian company’s proposed bond structure includes a loophole that was exploited by Indonesia’s infamous bond issuer Bakrie Telecom.
The offshore special purpose vehicle is the intermediary between the USD bond investors and the onshore company.
While investors have a reason to be cautious, willing parties may negotiate the pricing to compensate for the risk.
India’s Hella Infra Market – which runs a B2B marketplace for construction materials – has not set a price guidance for its debut USD bond that was mandated nearly four weeks ago, as investors are pushing back on its orphan special purpose vehicle (SPV) structure, IFR reported on 8 August 2025.
Eveline’s Take:
🏗️ Hella Infra is reportedly following the footsteps of another Indian company, ReNew Power, which found a way to get around the Reserve Bank of India’s pricing cap on external commercial borrowings. Investors have a reason to be cautious, as Hella Infra’s proposed structure includes a loophole that reminds me of Indonesia’s infamous bond issuer Bakrie Telecom.
🏗️ Hella Infra plans to use a Mauritius-based SPV to sell the USD bonds to international investors and tap the proceeds to purchase onshore bonds issued by the Indian company. Bakrie Telecom – part of Indonesia’s Bakrie Group – also used a Singapore SPV to issue offshore bonds and then transferred the proceeds to the onshore company. (Click here for my Indonesian Restructuring Case Studies).
🏗️ Bakrie Telecom’s Singapore SPV lent the bond proceeds to its onshore parent via an intercompany loan, whereas Hella Infra moved the money from offshore to onshore by taking up the rupee bonds. But the key similarity is that the offshore SPV is the intermediary between the USD bond investors and the onshore company, which means that these investors do not have a direct claim against the operating entity.
🏗️ Offshore bondholders were not recognized as direct creditors in Bakrie Telecom’s local in-court restructuring (PKPU) in late 2014. Even though the bond was guaranteed by the Indonesian parent, the noteholders were classified as creditors of the Singapore SPV. This SPV was listed as Bakrie Telecom’s creditor and voted in favour of its restructuring proposal.
🏗️ A US court granted recognition of Bakrie Telecom’s PKPU deal despite the objection of bondholders, though it stopped short of enforcing third-party releases requested by the Indonesians. The recognition signals that a US court exercises a high bar to deny a Chapter 15 filing, as the challenger must prove that the foreign proceeding was “manifestly contrary to public policy.”
🏗️ The Bakrie Telecom case was controversial because some Indonesian companies issued high-yield bonds with a similar structure to reduce withholding taxes. A friend who advised offshore debt issuers lamented that the risks section in Indonesian bond prospectuses became even longer thanks to the telecom company.
🏗️ There’s nothing so far to indicate that Hella Infra would go the way of Bakrie Telecom. The Indian company is not in distress and it doesn’t have a default history, according to public records. While investors have a reason to be cautious, willing parties may negotiate the pricing to compensate for the risk.