S&P Global Ratings has assigned a negative outlook to several companies of the Adani Group following charges of bribery by US courts against Chairman Gautam Adani. In a statement, the ratings agency, said domestic, international banks and bond market investors could set limits on their exposure to the Adani Group which may affect the funding of rated entities.
“The indictment could further raise questions regarding the management and governance of various Adani group entities” the agency noted, adding that should the allegations be proven, it could have some bearing on the company’s operations over time.
Placing a negative outlook on Adani Electricity Mumbai, Adani Ports, and Adani Green Energy Ltd, S&P observed the negative outlook indicates their cash flows could be materially affected if their access to funding access weakens. Moreover, their funding costs could rise significantly.
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Meanwhile, research firm CreditSights said refinancing for Adani Group’s green energy business is the biggest concern in the near term after the indictment of the conglomerate’s founder Gautam Adani by US prosecutors, Bloomberg reported.
“Funding channels will inevitably squeeze across the Adani Group, with creditors likely to reduce or limit their group-wide exposure,” the firm’s analysts Lakshmanan R, Jonathan Tan and Nicole Chua wrote in a note. They said they are most concerned about Adani Green Energy “given it has the weakest liquidity and credit fundamentals”.
The analysts pointed to short-term debt of about $2 billion, largely in the form of project loans, at Adani’s green energy unit. A $600 million bond sale was scrapped this week, the proceeds of which were earmarked for repaying foreign-currency loans. For Adani’s green energy business, some banks may be unwilling to rollover upcoming debt, “posing a high degree of refinancing risk,” CreditSights analysts wrote adding the Indian government may, however, prod state-backed power financiers to provide funds.
Prices of bonds issued by the Adani Group fell for the second consecutive day on Friday. Bonds of longer-dated maturities have fallen around 5% in two sessions and trade just below 80 cents. Analysts said the group’s cost of borrowing could go up by 200-300 basis points.
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S&P said it believes that if the allegations are proven,
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