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Informist, Friday, Nov. 22, 2024

 

--S&P affirms Adani Ports BBB- rating, cuts rtg outlook to negative

--S&P affirms Adani Electricity BBB- rating, cuts rtg outlook to negative 

--S&P cuts Adani cos rtg outlook on concern cash flow could be affected 

--S&P cuts Adani cos rtg outlook on concern of fall in access to funds 

--S&P cuts Adani cos rtg outlook on concern of rise in cost of funds 

 

MUMBAI – S&P Global Ratings Friday reaffirmed the "BBB-" rating of Adani Ports and Special Economic Zone Ltd. and of Adani Electricity Mumbai Ltd. but cut the ratings outlook on both to negative. It said the ratings outlook was revised on concerns that the cash flows of these companies could be materially affected if their funding access weakens, or a potential increase in their funding costs, or the impact on these companies if the US allegations of bribery against Gautam Adani, founder and chairman of the group, and seven others, are proven, in addition to the rating agency's assessment of the governance and business profiles.

 

The US authorities late Wednesday charged Gautam Adani and seven others in a case that alleges they paid bribes totalling $265 million to Indian government officials to obtain solar power contracts in India.

 

S&P Global said the allegations could renew questions over the group's governance practices and could likely damage the reputation of companies. The ratings agency said domestic banks, some international banks, and bond market participants could likely set group limits on their exposure to Adani group of companies, which might affect the rating entities' funding. S&P Global said Adani entities could likely be seen as a group because ownership of most is held by the same promoters or related-family entities.

 

If the allegations of bribery are proven, it could have some bearing on the company's operations over time despite the fact that the Adani group companies that S&P rates have long-established infrastructure assets with strong fundamentals and cash flows, the ratings agency said.

 

The ratings agency affirmed its "BB" rating on North Queensland Export Terminal Pty. Ltd. and Adani International Container Terminal Pvt. Ltd. each with a stable outlook. However, the ratings agency revised its outlook on Adani Green Energy Ltd. Restricted Group 2, a subsidiary of Adani Green Energy Ltd., to negative while affirming a "BB+" rating.

 

S&P Global said it downgraded the outlook on Adani Green Energy Ltd. Restricted Group 2 to negative as its parent company Adani Green Energy has also been indicted by the US Department of Justice. The ratings agency currently does not rate Adani Green.

 

The ratings agency said the stable outlook on North Queensland Export Terminal and Adani International Container Terminal shows the predictable cash flow of these companies. The Adani group holds a majority stake in North Queensland Export Terminal, an Australia-based single-purpose coal export terminal. North Queensland Export Terminal will likely have a minimum debt service coverage ratio of 1.55 after factoring in the revised debt limits and scheduled principal and interest payments to 2030, S&P said.

 

S&P Global has incorporated the refinancing risk when it comes to its rating on North Queensland Export Terminal. The company already has a debt of Australian $329 million due to mature in 12 months and the port's ratio of sources-to-uses of funds is less than one over this period. The ratings agency said the port intends to complete its refinancing by January 2025. Any further delay in refinancing is likely to increase liquidity risk. The ratings agency said it might lower the rating of North Queensland Export Terminal if it fails to refinance its bullet maturities.

 

The ratings agency said it expects the Adani International Container Terminal's debt service coverage ratio to be 1.73, excluding the last period. The rating of Adani International Container Terminal might be lowered if its debt service coverage ratio is expected to fall below 1.6, S&P Global said.

 

S&P Global could lower its rating on Adani Electricity, Adani Ports, and Adani Green Energy Ltd. Restricted Group 2 if it sees the ongoing investigation significantly weakening the funding access and increasing their funding costs, it said. Ratings could be lowered if the allegations of bribery prove to be true, S&P Global said.

 

At 1118 IST, shares of Adani Enterprises were up 0.8% at INR 2,200.05 on the National Stock Exchange and those of Adani Ports up 0.9% at INR 1,124.10. Shares of Adani Energy Solutions Ltd., the holding company of Adani Electricity, were down 3.8% at INR 670.65, and those of Adani Green Energy up 1.2% at INR 1,159.15.  End

 

US$1 = INR 84.49

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Aman Aryan and Ayushman Mishra

Edited by Ashish Shirke

 

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