Ratings firms revise outlook for Adani firms after US indictment

Credit rating agencies Fitch and Moody’s Analytics have downgraded their outlook for several Adani Group firms from stable to negative in the wake of the US indictment of chairman Gautam Adani and others.

Lowering its outlook for seven Adani firms, including Adani Green Energy Ltd (AGEL), Adani Ports and Special Economic Zone Ltd (APSEZ), and Adani Transmission Ltd, Moody’s said the indictment may make it tougher for group firms to raise funds and expand capital expenditure.

The rating action further recognizes the possibility of broader weaknesses in the governance structure across the rated Adani group entities as well as potential operational disruptions, including on their capital spending plans, while legal proceedings are going.

Although the allegations and the charges made by US attorney’s office and Securities Exchange Commission pertain to AGEL’s chairman and senior management team members, “we believe they could have a broader credit impact on all rated Adani Group issuers, given Gautam Adani’s prominent role as chairman of each of the rated entities or their parent companies as well as the controlling shareholder,” it said.

An upgrade of the ratings is unlikely in the near term, given the negative outlook on all seven issuers, it added.

Fitch places Adani firms in ‘rating watch negative’ list

Fitch Ratings, meanwhile, placed some Adani firms and their respective securities on a “rating watch negative” (RWN) list, while revising the outlook on some to negative from stable.

The securities placed on RWN list included dollar bonds under various categories of APSEZ, North Queensland Export Terminal Pty Ltd, and Mumbai International Airport Ltd.

The RWN reflects increased corporate governance risk and potential contagion risk that could impact funding access and liquidity of the rated entities, if corporate governance risk materializes following the US indictment, it said.

On 20 November, three AGEL board members were indicted by US authorities for alleged bribery and providing false and misleading statements to investors in a 2021 offshore note offering.

The group has denied these allegations.

While the US indictment mainly involves AGEL’s key leadership, the proceedings and the outcome could reflect significantly weaker corporate governance practices of the group and can lead to further negative rating actions, Fitch said.

“Two of the indicted board members belong to the founding shareholders of Adani group, which effectively own a majority of shares in all rated group entities (except Adani International Container Terminal Pvt. Ltd). These directors also serve on the boards of most other rated entities, raising contagion risk and renewing governance concerns across the group,” it added.

“We will monitor the ongoing investigations for developments impacting the financial flexibility of the rated entities, particularly any material deterioration in near—to medium-term funding access, including their ability to roll over existing credit lines or access new facilities, as well as potentially higher funding costs,” Fitch said.

No FCPA violations: Adani

Meanwhile, AGEL told the exchanges on Wednesday that its directors, Gautam Adani, Sagar Adani, and Vneet Jaain, have been charged on three counts in the criminal indictment, namely alleged securities fraud conspiracy; alleged wire fraud conspiracy; and alleged securities fraud.

“They have not been charged with any violation of the US Foreign Corrupt Practices Act (FCPA) in the counts set forth in the indictment of of the US Department of Justice or civil complaint of the US Securities and Exchange Commission (SEC),” it said.

Adani Group founder and chairman Gautam Adani is also chairman of AGEL, while Sagar Adani is executive director.

The clarification from AGEL came after reports said the trio have been charged with violations of the FCPA.

The FCPA makes it unlawful for certain classes of persons and entities to act corruptly in furtherance of an offer, promise, authorization or payment of money or anything of value, directly or indirectly, to a foreign official for the purpose of obtaining or retaining business for, or directing business to, any person.