Fitch revises outlook on 4 Adani firms to 'negative' amid US indictment

The US credit rating agency places three Adani entities under Rating Watch Negative status

American credit rating agency Fitch has revised the outlook on four Adani group firms from “stable” to “negative” and placed three other entities under Rating Watch Negative (RWN) status following the indictment of certain board members of Adani Green Energy Limited (AGEL) by the US on bribery charges.

 

The entities whose outlook has been revised to “negative” are rated “BBB”. These entities are Adani International Container Terminal Private Ltd (AICTPL), Adani Green Energy Limited Restricted Group 1 (AGEL RG1), Adani Green Energy Limited Restricted Group 2's (AGEL RG2) and Adani Energy Solutions Ltd Restricted Group's (AESL RG).

 

Fitch placed Adani Ports and Special Economic Zone Limited (APSEZ) – “BBB-”, North Queensland Export Terminal Pty Ltd (NQXT)  - “BB+”, and Mumbai International Airport Limited's (MIAL) – “BB+” under RWN.

 

“The RWN on APSEZ, NQXT and MIAL reflects increased corporate governance risk and potential contagion risk that could impact funding access and liquidity of the rated entities, if corporate governance risk materialises following the US indictment,” Fitch said in a statement.

 

Earlier, peer rating agency S&P Global had also revised outlook to “negative” on Adani Electricity Mumbai Ltd (Adani Electricity), Adani Ports and Special Economic Zone Ltd and Adani Green Energy Ltd Restricted Group 2 (AGEL RG2).

 

On November 20, three AGEL board members were indicted by the 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, Fitch added.

 

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.

 

“We will monitor the ongoing investigations for developments impacting 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,” it said.

 

The affirmation of ratings of AGEL RG1, AGEL RG 2, AESL RG and AICTPL reflects the ring-fencing structure of these restricted groups. The affirmation also factors in their relatively stable operating cash flows and their almost fully amortising debt, which will minimise any impact from reduced funding access that could arise from potential contagion effects.

 

The “Negative” outlook reflects the risk of higher funding costs and materialisation of weakness in corporate governance and internal controls, it added.