In 1st rating action, S&P cuts outlook on 2 Adani companies to negative

MUMBAI: In the first rating action since the Hindenburg report, S&P has lowered the outlook on Adani Ports and Adani Electricity to negative from stable. The ratings agency cited the deterioration in the credit profile of Adani Ports and Adani Electricity Mumbai due to governance risks and funding challenges for the larger Adani Group.
Earlier ICRA, an arm of Moody’s, said that it is monitoring the impact of these developments on its rated portfolio in Adani Group. The monitoring was especially for the financial flexibility of the group, its access to domestic & international capital markets and banking channels, pricing of debt, tightening of debt covenants, recall or acceleration of debt facilities and refinancing. According to ICRA, the companies it rates do not have any immediate refinancing requirements.

Another international rating agency Fitch said that there was no immediate impact on the Adani companies that it rates from the shortseller report.
A rating downgrade is a cause of worry for investors as it increases the returns demanded by debtors. This results in the prices of outstanding bonds falling.
S&P said that the allegations may hit the group’s ability to raise fresh equity or borrow. “Adani Group entities — rated and unrated — have significant growth ambitions. They will need an ongoing supply of equity and debt capital. The recent allegations may hurt the group’s ability to raise fresh equity or to borrow, particularly in US dollar public bond markets,” said S&P in its ratings rationale.
According to S&P, the decision to return the proceeds of the $2. 4-billion follow-on public offer of shares shows fresh public funding might be challenging until market confidence is restored.
ICRA said that while the companies that it rates do not have any immediate refinancing requirement, it is expected for some of the entities from FY25 onwards. It said that the credit ratings for Adani Ports, Adani Green Energy, and Adani Transmission are supported by their long-term contracts with governments or operating cash flows. “ICRA notes that some of the planned capex is discretionary in nature and can be deferred depending on the liquidity position,” the rating agency said.
S&P said that Adani may be downgraded if governance and funding risks at the group level lead it to believe that the governance and the funding access of Adani Ports has weakened materially. A downgrade is also possible if Adani Ports makes relate-party loans to other group companies or if the company’s ratio of funds from operations (FFO) to debt is likely to stay below 15% on a sustained basis.

Source link

Denial of responsibility! planetcirculate is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.