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Informist, Tuesday, Nov. 26, 2024

 

--Fitch Ratings puts Adani Energy long term currency rtg on 'watch negative' 

--Fitch puts Adani Electricity Mumbai long term rating on 'watch negative' 

 

MUMBAI – Fitch Ratings Tuesday placed the "BBB-" rating of Adani Ports and Special Economic Zone Ltd. and Adani Energy Solutions Ltd.'s long-term ratings on 'rating watch negative'. It also put the "BBB-" rating on the senior secured notes of Adani Electricity Mumbai Ltd. on 'rating watch negative'. The "BBB-" rating on the notes issued by Adani Energy Solutions' subsidiary, Adani Transmission Step-One Ltd., has also been placed on 'rating watch negative'. The ratings agency put Adani Ports long-term foreign currency rating and its US dollar senior unsecured bonds on negative watch.

 

The ratings have been put on a negative watch due to the increased corporate governance risk and potential contagion risk that could affect access to funding and liquidity of these companies of the Adani group following the recent bribery charges, Fitch Ratings said in a press release.

 

On Wednesday, a US court indicted group founder Gautam Adani and seven other senior officials of the group, including three Adani Green Energy board members, for allegedly bribing Indian officials for securing power supply contracts and for providing false and misleading statements to investors in a 2021 offshore note offering.

 

"We will monitor the investigations for any impact on the 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 credit spreads," Fitch Ratings said.

 

The ratings agency has also placed the ratings on North Queensland Export Terminal Pty Ltd., in which Adani group holds a majority stake, and Mumbai International Airport Ltd. on 'rating watch negative'. Fitch cut its ratings outlook to negative from stable on US dollar senior secured bonds of Adani International Container Terminal Pvt. Ltd. and of two subsidiaries of Adani Green Energy and a subsidiary of Adani Energy Solutions rated "BBB-". Adani International Container Terminal is a joint venture in which Adani Ports and Special Economic Zone holds a 50% stake.

 

Adani Ports and Special Economic Zone's cash balance of INR 89 billion as of Sept. 30 and its free cash flow should cover its current debt maturities of INR 113 billion, Fitch said. Fitch expects the near-term liquidity of Adani Energy Solutions and Adani Electricity Mumbai to be sufficient, as there is no significant scheduled debt maturing in the next 12-18 months. Adani Energy Solutions' cash balance as of Sept. 30 exceeds its current debt maturities and its near-term capital expenditure can be funded through INR 83 billion which it raised through a qualified institutional placement in August. 

 

The liquidity of Adani Energy Solutions' arm Adani Electricity Mumbai is supported by the bullet maturity of its US dollar notes, which account for more than 90% of all of its debt, with the earliest maturing in 2030. The company's cash balance exceeds its minimal debt maturities over the next 12 months and its operating cash flows are sufficient to cover most of its capital expenditure requirements, Fitch said.

 

Fitch said the increased reliance on onshore funding could heighten refinancing risk over the medium term, and a material rise in borrowing costs could reduce operating cash flow generation of Adani Ports and Special Economic Zone, and Adani Energy Solutions. The impact of a material deterioration in the group's funding access is likely to be limited for Adani Electricity Mumbai, Adani Green Energy, Adani Energy Solutions, and Adani International Container Terminal. 

 

The affirmation of the ratings of the subsidiaries of Adani Green Energy and Adani Energy Solutions, and Adani International Container Terminal is due to their relatively stable operating cash flows and their almost fully amortising debt, which will minimise any impact from reduced funding access, Fitch said. The long-term contracts of these companies will support their revenues and limit the downside to Fitch's current revenue risk assessments, it said.

 

Fitch expects to resolve the negative watch on the companies following the resolution of the ongoing US investigation or the emergence of clarity on the potential impact on the rated companies. 

 

At 1127 IST, shares of Adani Ports and Special Economic Zone traded at INR 1,141.05 on the National Stock Exchange, down 2.2%. Shares of Adani Energy Solutions traded at INR 600, down 4%, and those of Adani Green Energy traded at INR 906.20, down 6.4%.  End

 

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

 

Reported by Steffy Maria Paul

Edited by Ashish Shirke and Namrata Rao

 

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