Bribery of Indian government officials, securities and wire fraud, conspiracy to violate the US Foreign Corrupt Practices Act, and obstruction of justice are among the accusations and charges.
Citing the US indictment of Chairman Gautam Adani and others on alleged bribery charges, ratings agency Moody's said Tuesday that it had lowered the outlook on the ratings of seven Adani entities from "stable" to "negative," while Fitch Ratings placed some of the conglomerate's bonds on negative watch.All seven companies—Adani Ports and Special Economic Zone Ltd., Adani Green Energy Ltd.'s two limited restricted groups, Adani Transmission Step-One Ltd., Adani Transportation Restricted group 1 (AESL RG1), Adani Electricity Mumbai Ltd., and Adani International Container Terminal Pvt Ltd.—had their ratings confirmed by Moody's.
"These rating actions follow the indictment of Adani Green Energy Ltd's (AGEL) chairman Gautam Adani and several senior management team members by the US Attorney's Office in a criminal case and the filing of charges by the US Securities and Exchange Commission (SEC) in a civil case," stated Moody's.
"These rating actions follow the indictment of Adani Green Energy Ltd's (AGEL) chairman Gautam Adani and several senior management team members by the US Attorney's Office in a criminal case and the filing of charges by the US Securities and Exchange Commission (SEC) in a civil case," stated Moody's.
False statements made in annual reports and to the US government regarding its investigation into the group are among the charges and allegations, along with conspiracy to violate the US Foreign Corrupt Practices Act and obstruct justice, bribery of Indian government officials, and securities and wire fraud.
"The change in the outlook on the seven Adani entities to negative considers the indictment of Adani and other senior Adani executives on bribery and other charges, which will likely weaken Adani Group's access to funding and increase its capital costs," it stated.
Moody's stated that the rating action acknowledges the potential for operational disruptions, notably on their capital spending plans, as well as wider vulnerabilities in the governance structure across the rated Adani group entities.
"The change in the outlook on the seven Adani entities to negative considers the indictment of Adani and other senior Adani executives on bribery and other charges, which will likely weaken Adani Group's access to funding and increase its capital costs," it stated.
Moody's stated that the rating action acknowledges the potential for operational disruptions, notably on their capital spending plans, as well as wider vulnerabilities in the governance structure across the rated Adani group entities.
"Although the allegations and the charges made by US Attorney's Office and SEC 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 stated.
It stated that the group's project finance entities are not subject to refinancing risk and do not need a significant capital investment, but they are still vulnerable to possible governance flaws and the risks associated with any unfavorable outcomes in the ongoing legal proceedings.
It stated that the group's project finance entities are not subject to refinancing risk and do not need a significant capital investment, but they are still vulnerable to possible governance flaws and the risks associated with any unfavorable outcomes in the ongoing legal proceedings.
Given the negative outlook on all seven issuers, Moody's stated that an upgrade of the ratings is doubtful in the near future. However, it stated that if legal procedures are resolved amicably and have no materially negative credit impact, the ratings might be changed to stable.
"A stable outlook will also be predicated on the group maintaining appropriate financial metrics for the respective ratings, demonstrating its retained access to funding to meet growth initiatives and refinancing requirements, and strengthening its governance practices across the group entities," it stated. "If the legal actions cause a significant disruption to the group entities' operations or access to cash, we may reduce their ratings. If the group is unable to resolve governance difficulties, a downgrade is also likely.
"A stable outlook will also be predicated on the group maintaining appropriate financial metrics for the respective ratings, demonstrating its retained access to funding to meet growth initiatives and refinancing requirements, and strengthening its governance practices across the group entities," it stated. "If the legal actions cause a significant disruption to the group entities' operations or access to cash, we may reduce their ratings. If the group is unable to resolve governance difficulties, a downgrade is also likely.
In a separate move, Fitch put Adani Energy and Adani Electricity Mumbai on a negative watch list after the US Securities and Exchange Commission and Department of Justice indicted some board members of Adani Green Energy Limited (AGEL) on bribery charges.
Increased corporate governance risk and possible contagion risk that could impact finance availability and liquidity are reflected in this, it stated.
Increased corporate governance risk and possible contagion risk that could impact finance availability and liquidity are reflected in this, it stated.
"The procedures and the outcome may reveal even weaker corporate governance standards of the group and result in negative rating actions, even if the US prosecution primarily targets AGEL's core leadership. It stated that one of the indicted board members is a trustee and beneficiary in the SB Adani Family Trust, which essentially holds the majority of shares in both AESL and AEML, and that two of them are founder shareholders of the Adani group.
According to Fitch, it will keep an eye on the investigations to see if they have an effect on the rated entities' financial flexibility, especially if there is a significant decline in their ability to obtain funding for the near- to medium-term, including the ability to roll over current credit lines or obtain new facilities, as well as any possible increase in credit spreads.
According to Fitch, it will keep an eye on the investigations to see if they have an effect on the rated entities' financial flexibility, especially if there is a significant decline in their ability to obtain funding for the near- to medium-term, including the ability to roll over current credit lines or obtain new facilities, as well as any possible increase in credit spreads.
Since there aren't any major scheduled debt maturities in the next 12 to 18 months, the rating agency anticipated that AESL and AEML will have enough short-term liquidity. Their capital expenditure plans are also quite flexible.
"We think the most recent events may make it more difficult for the group to obtain funds. Even if AESL's capital expenditure plans are somewhat flexible, this could have a big impact on its expansion goals. According to the report, a significant increase in borrowing costs could lower operating cash flow generation, and a greater reliance on onshore capital could increase refinancing risk over the medium run.
Since rules permit operating and interest costs to be passed through, the impact of a significant decline in the group's finance access is probably going to be minimal for AEML.
"We think the most recent events may make it more difficult for the group to obtain funds. Even if AESL's capital expenditure plans are somewhat flexible, this could have a big impact on its expansion goals. According to the report, a significant increase in borrowing costs could lower operating cash flow generation, and a greater reliance on onshore capital could increase refinancing risk over the medium run.
Since rules permit operating and interest costs to be passed through, the impact of a significant decline in the group's finance access is probably going to be minimal for AEML.
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