After Fitch, another global ratings agency, Moody's Ratings, today affirmed the ratings of 7 Adani Group companies, changing the outlook on all seven issuers to "negative" from "stable". The 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.
The charges and allegations include bribery of Indian government officials, securities and wire fraud, conspiracy to violate the US Foreign Corrupt Practices Act and obstruct justice, false statements made in AGEL's annual reports, and false statements made to the US government about its investigation into the group.
Moody's says the change in the outlook on the seven Adani entities to "negative" comes amid the indictment of Adani and other senior executives on alleged bribery and other charges. The ratings agency says it will likely "weaken" Adani Group's access to funding and increase its capital costs.
The rating action further recognises 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 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," says Moody's.
It says the project finance entities of the group, including AGEL RG-1, AGEL RG-2, AESL RG1 and AICTPL, are not exposed to refinancing risk and do not require any substantial capital investment. "However, they remain exposed to the potential governance weakness and the risks that could arise from any negative findings in the ongoing legal proceedings."
Moody's also says governance risks are "material" to the rating action, and that its main focus over the outlook period will be on the potential implications to the group companies' operations and access to capital from the ongoing legal proceedings as well as the group's strategy toward strengthening its governance practices.
The seven affected issuers are:
1. Moody's says Adani Green Energy Limited Restricted Group (AGEL RG-1), which comprises Adani Green Energy (UP) Limited; Parampujya Solar Energy Private Limited; Prayatna Developers Private Limited – Ba1 ratings affirmed; outlook changed to negative from stable.
2. Adani Green Energy Limited Restricted Group (AGEL RG-2), which comprises Wardha Solar (Maharashtra) Private Limited, Kodangal Solar Parks Private Limited and Adani Renewable Energy (Rj) Limited - Ba1 ratings affirmed; outlook changed to negative from stable.
3. Adani Transmission Step-One Limited (ATSOL) - Baa3 ratings affirmed; outlook changed to negative from stable.
4. Adani Transmission Restricted Group 1 (AESL RG1), which comprises Barmer Power Transmission Service Limited; Raipur-Rajnandgaon-Warora Transmission Ltd; Sipat Transmission Limited; Thar Power Transmission Service Limited; Hadoti Power Transmission Service Limited; Chhattisgarh-WR Transmission Limited - Baa3 ratings affirmed; outlook changed to negative from stable.
5. Adani Electricity Mumbai Limited (AEML) - Baa3 ratings affirmed; outlook changed to negative from stable
6. Adani Ports and Special Economic Zone Limited (APSEZ) - Baa3 ratings affirmed; outlook changed to negative from stable.
7. Adani International Container Terminal Private Ltd (AICTPL) - Baa3 ratings affirmed; outlook changed to negative from stable.
Notably, global ratings agency Fitch also put a few Adani group bonds on ratings watch amid a $265 million bribery indictment case in a U.S. court. Fitch Ratings placed Adani Energy Solutions' (AESL) long-term foreign-and-local-currency issuer default ratings of 'BBB-' and the 'BBB-' ratings on Adani Electricity Mumbai Ltd's (AEML) senior secured notes on rating watch negative (RWN).
