Moody's Changes Outlook On Seven Adani Group Companies To Negative
Moody's says US indictment of group executives on bribery and other charges likely to weaken Adani Group's funding access and raise its capital costs
(The Corner Office Journal) -- Moody's Ratings changed the outlook on seven Adani Group companies to negative from stable but affirmed their ratings.
The development follows the indictment of Adani Green Energy Ltd. (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, Moody's said in a statement.
The charges and allegations include: (1) bribery of Indian government officials, (2) securities and wire fraud, (3) conspiracy to violate the US Foreign Corrupt Practices Act and obstruct justice, (4) false statements made in AGEL's annual reports, and (5) false statements made to the US government in relation to its investigation into the group, it added.
Adani Group, which has denied the allegations, is seeking legal recourse.
The rating agency changed the outlook to negative on:
1. Adani Green Energy Limited Restricted Group (AGEL RG-1)
2. Adani Green Energy Limited Restricted Group (AGEL RG-2)
3. Adani Transmission Step-One Ltd.
4. Adani Transmission Restricted Group 1 (AESL RG1)
5. Adani Electricity Mumbai Limited (AEML)
6. Adani Ports and Special Economic Zone Ltd.
7. Adani International Container Terminal Private Ltd.
Moody's affirmed the Ba1 ratings on AGEL RG-1 and AGEL RG-2, and Baa3 ratings on the other five companies.
The Rationale
Moody's said the change in the outlook on the seven Adani Group entities to negative considers the indictment of Gautam Adani and other senior group executives on bribery and other charges, which will likely weaken Adani Group's access to funding and increase its capital costs.
“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,” it added.
Moody's said although the allegations and the charges made by US Attorney's Office and SEC pertain to AGEL's chairman and senior management team members, 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.
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